In a 53-page published opinion filed October 8, 2021, the Fourth District Court of Appeal mostly affirmed, but reversed in part, a judgment in a CEQA action challenging two sets of projects of the City of San Diego to underground overhead utility wires in several neighborhoods.  McCann v. City of San Diego (2021) ___ Cal.App.5th ___.  The opinion addressed and resolved a number of significant and interesting CEQA claims and issues involving the exhaustion doctrine; procedures for administratively appealing CEQA exemption determinations (and related due process notice issues); piecemealing; project description; aesthetics; and proper methodology for determining the significance of GHG emissions impacts through assessing a project’s consistency with a local Climate Action Plan (CAP).

The City’s Development And Implementation Of The Undergrounding Projects

Over 50 years ago, the City of San Diego began its efforts to convert its overhead, wooden-pole supported utility systems to an underground system.  Constrained by limited funding (which comes from both utility tariffs and a separate City “Surcharge Fund”), by 2016, it had completed 406 miles of undergrounding, but still had 1,000 miles of overhead lines to convert, and it set a goal of 15 miles per year in its 2017 Utilities Undergrounding Program Master Plan.  The Master Plan designated the areas of the City with overhead lines into sections called “blocks” and “corridors” (labeled by funding source) and (along with City’s Code) prescribed a process for the City Council to annually approve a “project allocation” based on available funding, after which staff would begin initial work (including CEQA review) for each block.  The Council would thereafter create an “Underground Utility District” for the selected blocks to be completed with the year’s funding; residents/owners within the district would be mailed a notice of public hearing and a map so they could comment prior to Council’s approval of creation of the district.  After the district’s creation, the City undertakes a one- to two-year “detailed design process” involving noticed community meetings and resident/owner opportunities to discuss the projects, including the placement of utility boxes and streetlights.

Project construction entails workers digging trenches or drilling tunnels in the public right-of-way (streets and alleys) for the underground wires and cables, boring or trenching lateral lines to individual buildings’ electrical meters, installing underground conduit, backfilling the soil, and pulling the cable through.  New transformers, cable boxes, and pedestals are installed above ground as necessary.  The central focus of the claims raised in the litigation were the transformers, required for every 8 to 14 homes, which are green boxes, roughly 3 feet cubed, placed on short concrete 4’ by 4’ pads.  After construction, the new system is activated, existing overhead wires and poles are removed, and certain other associated work (new street lights, curb ramps, street repaving, tree planting) is performed.

The Litigation

Plaintiff McCann challenged two sets of projects, in different locations, one of which had been determined by the City to be CEQA-exempt (the “Exempt Projects”) and the other of which was approved pursuant to a mitigated negative declaration (MND) (the “MND Projects”).  McCann essentially contended that the transformer boxes, and the projects as a whole, resulted in significant environmental impacts requiring an EIR for both sets.  After briefing and argument, the trial court denied the requested writ relief, finding McCann failed to exhaust administrative remedies prior to seeking judicial review of the Exempt Projects, and failed to demonstrate that substantial evidence supported a fair argument that the MND Projects may have a significant environmental impact.

The Court Of Appeal’s Opinion

McCann’s timely appeal of the ensuing judgment essentially raised all the same issues on which she lost in the trial court and, with one exception, the Court of Appeal affirmed the denial of relief on every issue.

McCann Failed To Exhaust Administrative Remedies As To The Exempt Projects And The City’s Available Appeal Remedy Complied With CEQA And Due Process

On de novo review, the Court of Appeal held the exhaustion of administrative remedies doctrine applied to bar McCann’s challenges to the Exempt Projects, rejecting her various arguments that the doctrine didn’t apply.  Observing that where an administrative remedy is provided it is a “jurisdictional prerequisite” that must be exhausted before courts will act (citing Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865, 873-874), the Court noted that Public Resources Code § 21177 addresses exhaustion in CEQA cases but does not prescribe a specific appeal process following an agency’s exemption determination.  CEQA elsewhere requires that an agency must provide for an appeal of a nonelected official’s or decisionmaking body’s exemption determination to the agency’s elected decisionmaking body (§ 21151(c)) and that the “local lead agency may establish procedures governing such appeals” (CEQA Guidelines, § 15061(e)).  (See also, Schmid v. City and County of San Francisco (2021) 60 Cal.App.5th 470, 492-493, my 4/13/21 post on which can be found here.)  Where an agency adopts an administrative appeal process, the common law exhaustion rule applies in CEQA cases and the remedy’s scope is defined by the specific jurisdiction’s relevant and available local procedures.  (Citing Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577, 592, fn 6; California Clean Energy Committee v. City of San Jose (2013) 220 Cal.App.4th 1325, 1345 [my 11/12/13 post on which can be found here]; Clews Land & Livestock, LLC v. City of San Diego (2017) 19 Cal.App.5th 161, 187 [my 1/16/18 post on which can be found here]; and Stop Syar Expansion v. County of Napa (2021) 63 Cal.App.5th 444, 456-457 [my 5/3/21 post on which can be found here].)

Here, the City’s Municipal Code section 112.0520(b) set forth an administrative appeal procedure whereby a person seeking to challenge an “environmental determination” – defined by Code § 113.0103 to include a CEQA exemption determination – that is not made by the City Council must file an application to appeal to the City Council within 10 business days, which would allow a public hearing on and determination of the exemption challenge well before the project proceeded to the stage of a hearing on project approval.  Because McCann concededly failed to avail herself of this administrative appeal remedy, the Court of Appeal (like the trial court) held she failed to exhaust administrative remedies and her judicial challenge to the Exempt Projects was therefore barred.

The Court rejected McCann’s related arguments that exhaustion did not apply because the “Notice of Right to Appeal” provided by the City violated constitutional due process principles and CEQA and improperly bifurcated the environmental determination process.  First, it held the City’s procedures of posting the Notice of Right to Appeal on the City’s website, and emailing it to all City Council members and local planning groups in affected neighborhoods, complied with due process, and that individualized notice reasonably calculated to reach every impacted homeowner was not required. The exemption decision was not a land use decision, but an environmental one distinct from project approval, and did not deprive McCann of any significant property interest.  The due process notice principles of Horn v. County of Ventura (1979) 24 Cal.3d 605 do not apply to decisions that do not deprive adjacent property owners of significant property interests, and which have only a de minimus effect on land, and CEQA notices for environmental determinations – such as the notice of exemption determination by a nonelected official at issue here – fall into that category.

The transitory construction impacts McCann complained of were not significant, substantial or permanent deprivations of her property interests, and her concerns about the aesthetic impacts of transformer box placements were akin to those of petitioners in other cases which held such concerns involved de minimus effects that as a matter of law did not trigger constitutional due process notice rights under Horn.  (Citing and discussing Robinson v. City and County of San Francisco (2012) 208 Cal.App.4th 950 [my post 9/12/12 on which can be found here] and Taxpayers for Accountable School Bond Spending v. San Diego Unified School District (2013) 215 Cal.App.4th 1013 [my 6/25/13 post on which can be found here].)  Per the Court:  “Although we recognize the inconvenience of construction activity may interrupt residents for a short period of time and the transformer boxes in the public right of way may be considered less than ideal, the activities here do not deprive McCann and other residents of a significant property interest.  Thus, Horn does not apply and the City’s notice did not violate McCann’s due process rights.”

The Court recognized that, apart from Horn’s due process notice requirements, administrative remedies must comport with basic procedural due process requirements of reasonable notice and a reasonable opportunity to be heard, but that in the CEQA context this does not require any particular procedure.  Per the Court, “the City’s noticing requirements provide adequate notice because they comport with the general noticing requirements the Legislature has deemed sufficient for other CEQA determinations.”  (Citing CEQA Guidelines, §§ 15072, 15073, 15075, 15087, 15094, 15105.)  Further, the Court noted that the Supreme Court has expressly declined to impose additional requirements for notices beyond those prescribed by the Guidelines; it thus found the City’s “Notice of Right to Appeal” and related processes sufficient for the administrative remedy under due process principles, and under CEQA, rejecting McCann’s attempted but misplaced reliance on cases involving an agency’s filing of a notice of exemption (NOE) with the County Clerk as involving a different and distinct type of CEQA document and discrete issues having no bearing on whether the City’s Notice of Right to Appeal was properly noticed.

Finally, the Court rejected McCann’s argument that the City improperly “bifurcated” its decision process so as to excuse her failure to exhaust.  The City’s bifurcated process is permitted by CEQA because exemption determinations are not “environmental documents” that must be reviewed and approved by the decisionmaking body (CEQA Guidelines, §§ 15022(a)(9), 15361); cases involving review of MNDs and EIRs are inapposite in the exemption determination context, and CEQA at most requires that staff environmental decisions be made appealable to the elected decisionmaking body (Pub. Resources Code, § 21151(c)), a requirement met by the City’s administrative appeal procedures for exemption determinations here.  As summed up by the Court:  “The City properly delegated to staff the authority to make the determination under CEQA that the projects were exempt and established a procedure to appeal that decision to the City Council.  Seeing no error in the City’s process, McCann fails to establish any excuse for her failure to exhaust her administrative remedies.”

The City Did Not Improperly “Piecemeal” or “Segment” The MND Projects

The Court of Appeal recited CEQA authorities supporting the general proposition that “an agency may not improperly split a project into separate segments to avoid consideration of the cumulative impacts of the project” but concluded the City did not violate them by not considering the Exempt and MND Projects together “as one citywide project.”  Per the Court:  “Here, each utility undergrounding project was independently functional and did not rely on any other undergrounding project to operate” and future projects would not affect the functionality of the MND Projects if they did not go forward, nor materially change the function or scope of the MND Projects if they did.  While similar in nature, each undergrounding project is independent of the others in that it is not a “first step toward” and doesn’t “legally compel” or “practically presume” the completion of other actions, and “can be implemented independently.”  (Citing Banning Ranch Conservancy v. City of Newport Beach (2012) 211 Cal.App.4th 1209, 1223.)  The City thus did not err in defining the scope of the MND Projects for CEQA  review purposes.

The City’s Project Description For The MND Projects Was Adequate And Complete

The Court rejected McCann’s argument that the City improperly deferred its decision on the precise locations of the transformer boxes to a later design phase of the project, and thus rendered its project description of the MND Projects inadequate.  Whether or not the transformer box locations were highly “controversial” (as McCann asserted), CEQA focuses on physical environmental impacts, not controversy or neighborhood sentiment.  McCann failed to establish that the precise locations of the boxes – which were essentially constrained so as to be placed in the public right-of-way in spots unoccupied by existing trees – was critical to evaluating their generalized environmental impacts, including on aesthetics.

No Substantial Evidence Supported A Fair Argument
The MND Projects Would Have A Significant Aesthetic Impact

Rejecting McCann’s argument that substantial evidence supported a fair argument the MND Projects would have significant aesthetic impacts requiring analysis in an EIR, the Court held the argument and the evidence were insufficient as a matter of law:  “The consideration of aesthetic impacts under CEQA arises for projects that have a significantly larger impact than the transformers at issue here.  When considered in the context of existing case law, the aesthetic impact of the transformers falls far short of the significant impact needed to trigger the need for an EIR.”

McCann failed to carry her burden to identify record evidence supporting the requisite fair argument.  While most of McCann’s arguments focused on her own Kensington neighborhood, which she suggested contained historical resources, unique and pristine streetscapes, and “heritage trees,” that neighborhood fell within the Exempt Projects as to which her CEQA challenge was barred by failure to exhaust.  Her generalized claim of aesthetic impacts applied to only one neighborhood actually encompassed within the MND Projects, as to which she cited but one commenter and expressed concerns about removal of mature trees, and having transformers placed on streets, sidewalks and yards (as opposed to the commenter’s preference for alleys) where they may become “graffiti magnets.”

Citing to cases discussing the sufficiency of lay opinion as substantial evidence to support a fair argument of significant aesthetic impact in various contexts, the Court held McCann’s evidence – i.e., “comment by a single speaker, along with her own comments and those of her attorney, regarding a small portion of the MND Projects” – fell short of constituting substantial evidence supporting her claims.  Moreover, even if “substantial,” the evidence didn’t relate to significant aesthetic impacts of the types discussed in CEQA Guidelines Appendix G and the case law, i.e., impacts that would substantially degrade the existing visual character of the neighborhood.  The Court found that as “a general conclusion … utility boxes will not necessarily have a significant aesthetic impact” (citing San Francisco Beautiful v. City and County of San Francisco (2014) 226 Cal.App.4th 1012 [my 6/2/14 post on which can be found here]), and discussed other cases supporting this conclusion as applicable to the facts and evidence at issue here, which supported the inference that street-adjacent transformers “would often be hidden from [public] view behind parked cars or obscured by tree trunks or landscaping.”  Per the Court:  “While aesthetic impacts must not be ignored under CEQA, we also see no reason to believe that CEQA requires an EIR to evaluate the aesthetic impact of small, three-foot cubes placed next to the street in a developed neighborhood.”  (Citing Bowman v. City of Berkeley (2004) 122 Cal.App.4th 572, 592.)  Nor was the fact that some trees may be trimmed or replaced elsewhere as a result of the MND Projects enough to establish a significant aesthetic effect.

City’s Determination That MND Projects’ GHG Emissions
Are Not Significant Was Not Supported By Substantial Evidence

The lone ruling on which the trial court was reversed was its finding that the City adequately assessed the MND Projects’ consistency with the City’s CAP in reaching its determination of no significant GHG/climate change impacts.  The City’s 2015 CAP set forth five broad strategies, each consisting of a range of specific actions, to reduce cumulative GHG emissions in the City, and was intended to serve as a Qualified GHG Reduction Plan for purposes of evaluating the significance of individual projects’ GHG impacts under CEQA, such that a determination of a project’s consistency with the CAP would support the conclusion that the project had no significant GHG impacts.

Since mid-2016, the City had employed a “Climate Action Plan Consistency Checklist” prepared in conjunction with the CAP for this purpose, but the Checklist has only three possible steps.  It first asks whether a project is consistent with the City’s land use and zoning regulations or would otherwise result in equivalent or fewer GHG emissions than consistent projects.  If the answer to that question is “no,” a significant impact requiring an EIR is generally found; if the answer is “yes,” the step two question asks – but, critically, only for projects involving permits requiring a certificate of occupancy or certain residential structures – whether the project is consistent with the applicable strategies and actions of the CAP.  The CAP checklist thus excludes several types of projects, including wireless communications facilities and non-building infrastructure projects, from the CAP consistency analysis.  (The third step applies only to transit priority area projects proposing increased density beyond existing plans and is not relevant here.)

The obvious problem found by the Court of Appeal was that the City used the Checklist to determine the MND Projects were consistent with the CAP, but stopped the analysis after the first step because they did not require a certificate of occupancy, and the City thus never actually analyzed whether the Projects were consistent with numerous potentially applicable provisions of the CAP.  In sum, the City erred in using the Checklist to determine the MND Projects’ consistency with the CAP.  As the Court explained:  “[T]he City never analyzed whether the MND Projects are consistent with the Climate Action Plan because the City’s only existing tool does not address projects that do not require a certificate of occupancy [COO].  The City may not conclude the projects are consistent with the [CAP] simply by directing staff to skip the consistency analysis.”  In other words, the distinction between COO and non-COO projects had “no rational basis,” and the City was required to assess infrastructure projects for consistency with the CAP as well as COO projects.

While the Court emphasized that it was not holding that an EIR would be required, it made clear that additional analysis – i.e., identifying CAP GHG reduction measures applicable to the MND Projects and analyzing their consistency with such measures – would be necessary to provide substantial evidence to support the MND’s conclusions.  It thus directed that a new judgment be entered granting the petition’s second cause of action and directing a writ be issued setting aside the resolutions adopting the MND and MMRP and establishing the utility districts, while affirming the judgment in all other respects.  (The Court also affirmed the trial court’s denial of McCann’s request for a preliminary injunction against tree cutting in her neighborhood, as it was based entirely on her claims regarding the Exempt Projects, which lacked merit because barred by her failure to exhaust.)

Conclusion And Implications

The case addresses and provides useful guidance on a number of interesting CEQA and related issues, particularly in the areas of exhaustion of administrative remedies, and related CEQA and due process notice requirements and standards, as well as aesthetics and GHG CAP consistency analyses.

 

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 fifty years.  For nearly all that time, the firm also has written Miller & Starr, California Real Estate 3d, 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, construction, management, title insurance, environmental law, and redevelopment and land use.  For more information, visit www.msrlegal.com.