BANKER'S HILL v. CITY OF SAN DIEGO

Filed 5/8/06; reposted 5/9/06 to provide correct version

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Ronald S. Prager, Judge. Affirmed.

Johnson & Hanson, Kevin K. Johnson and Jared Phil Hanson for Plaintiff and Appellant.

Michael J. Aguirre, City Attorney, and Joe B. Cordileone, Deputy City Attorney, for Defendant and Respondent City of San Diego.

Seltzer Caplan McMahon Vitek, Monty A. McIntyre and G. Scott Williams for Real Parties in Interest and Respondents Mi Arbolito, LLC, Martinez + Cutri Corporation and 1700 Investors, LLC.

In this appeal we are asked to decide whether respondent City of San Diego (the City) properly determined that the proposed development of a 14‑story residential building is exempt from the California Environmental Quality Act (CEQA) (Pub. Res. Code, § 21000 et seq.)^[1] under a categorical exemption for urban in‑fill development projects set forth in the Guidelines for Implementation of CEQA (Guidelines) adopted by the Secretary of the California Resources Agency (the Secretary).^[2] (Guidelines, § 15332.)

For the reasons set forth below, we affirm the judgment.

I

FACTUAL AND PROCEDURAL BACKGROUND

Real parties in interest and respondents, developers Mi Arbolito, LLC and 1700 Investors, LLC, and architect Martinez + Cutri Corporation (collectively, the Developer) propose to construct a 14‑unit, 14‑story multi‑family residential building at 3415 Sixth Avenue in San Diego, with underground parking (the Project). The site of the Project is a 10,247‑square‑foot vacant lot located on the northeast corner of Sixth Avenue and Upas Street, which is zoned for multi‑residential use. Across the street from the Project is the northwest corner of Balboa Park -- an approximate 1,100‑acre developed urban park containing theaters, museums, restaurants and other public facilities. Approximately one block away from the Project, on Seventh Avenue, is the historic Marston House, a designated historical landmark, with other historic residences nearby. Directly to the east of the lot, on Upas Street, is a high-rise condominium building referred to as Del Prado, which is approximately the same height as the building proposed for the Project, but three and a half times as wide.

The Developer first proposed the Project to the City in March 2003.^[3] In November 2003, the City approved a shoring and grading permit, authorizing the Developer to begin site preparation work, including excavation for the parking garage. Approximately two months later, in January 2004, the City issued a building permit for pad footings for the building's underground parking garage.

Appellant Banker's Hill, Hillcrest, Park West Community Preservation Group (the Preservation Group) filed a petition for a writ of mandate, alleging that the City had violated CEQA by approving the Project without conducting an environmental review under CEQA.^[4] In March 2004, the trial court denied the Preservation Group's application for preliminary injunctive relief on the basis, among others, that the City was in the process of considering what kind of environmental review to undertake for the Project.

After preliminary discussions between the Developer and the City staff regarding CEQA's application to the Project, the Developer submitted a formal request to the City on March 26, 2004, for a determination of exemption from CEQA. On March 29, 2004, the City's Development Services Department issued a notice of exemption pursuant to CEQA section 21152(b). The notice of exemption stated that the Project is exempt from CEQA for two separate reasons. First, the Project requires only ministerial approval by the City, and thus is exempt under CEQA section 21080(b)(1) and Guidelines section 15268, which exempt ministerial approvals from CEQA.^[5] Second, the Project is an urban in‑fill development project, and thus is exempt from CEQA under Guidelines section 15332.

The Preservation Group appealed the notice of exemption to the City Council. (See CEQA, § 21151(c).)^[6] Based on further investigation, the City Manager submitted a report to the City Council, which recommended that the City Council deny the appeal. Because of evidence that the Project may end up being constructed as a condominium project, the City Manager did not recommend that the City Council find the Project to be exempt on the ground that it would require only ministerial approvals. Instead, the City Manager recommended that the City Council rely solely on the exemption for urban in‑fill development under Guidelines section 15332.

Following a public hearing, the City Council denied the appeal and enacted a resolution stating that "the Project meets the conditions described in State Guidelines section 15332 and therefore qualifies for a categorical exemption and . . . no exceptions as described in [Guidelines] section 15300.2 apply to the Project." The resolution makes specific findings regarding zoning traffic, noise, air quality, and water quality, among other things. It states that "[a]pproval of the Project would not result in any significant effects relating to traffic, noise, air quality, or water quality," and that "[t]here is no reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances." Based on the resolution, the City filed a notice of exemption on October 8, 2004, citing the exemption for urban in‑fill development in Guidelines section 15332.

Following the City Council's determination, the Preservation Group filed a second amended petition for writ of mandate on November 14, 2004. The trial court denied the petition, agreeing with the City that the Project is exempt from CEQA under Guidelines section 15332. On the basis, among others, that the issue had not been raised during the administrative proceedings, the trial court also rejected the Preservation Group's contention that the City impermissibly reviewed the Project in a piecemeal manner by approving the grading, shoring and pad footings permits before conducting a preliminary review of whether to approve the entire Project.

The Preservation Group appeals, contending that the City incorrectly determined the Project was exempt from CEQA and that the City impermissibly reviewed the Project in a piecemeal manner.

II

DISCUSSION

In considering a petition for a writ of mandate in a CEQA case, "[o]ur task on appeal is 'the same as the trial court's.' [Citation.] Thus, we conduct our review independent of the trial court's findings." (Quail Botanical Gardens Foundation, Inc. v. City of Encinitas (1994) 29 Cal.App.4th 1597, 1602, fn. 3 (Quail Botanical Gardens).) Accordingly, we examine the City's decision, not the trial court's.

An important threshold question in this case is the standard by which we review the City's decision. To better define our inquiry, we first turn to an overview of the CEQA process.

A

Overview of the CEQA Process

CEQA establishes "a three-tiered process to ensure that public agencies inform their decisions with environmental considerations." We explain these three steps in detail below. (Davidon Homes v. City of San Jose (1997) 54 Cal.App.4th 106, 112 (Davidon); see also Guidelines, § 15002(k) [describing three-step process].)

1. First Step in the CEQA Process

The first step "is jurisdictional, requiring that an agency conduct a preliminary review in order to determine whether CEQA applies to a proposed activity." (Davidon, supra, 54 Cal.App.4th at p. 112; see also Guidelines, § 15060.) The Guidelines give the agency 30 days to conduct this preliminary review. (Guidelines, § 15060.) As part of the preliminary review, the public agency must determine the application of any statutory exemptions or categorical exemptions that would exempt the proposed project from further review under CEQA. (See Guidelines, § 15282 [listing statutory exemptions]; Guidelines, §§ 15300-15333 [listing 33 classes of categorical exemptions].)^[7] The categorical exemptions are contained in the Guidelines and are formulated by the Secretary under authority conferred by CEQA section 21084(a).^[8] If, as a result of preliminary review, "the agency finds the project is exempt from CEQA under any of the stated exemptions, no further environmental review is necessary. The agency may prepare and file a notice of exemption, citing the relevant section of the Guidelines and including a brief 'statement of reasons to support the finding.' " (Davidon, supra, 54 Cal.App.4th at p. 113, citing Guidelines, §§ 15061(d), 15062(a)(3).)

2. Second Step in the CEQA Process

If the project does not fall within an exemption, the agency proceeds to the second step of the process and conducts an initial study to determine if the project may have a significant effect on the environment. (Guidelines, § 15063.) If, based on the initial study, the public agency determines that "there is substantial evidence, in light of the whole record . . . that the project may have a significant effect on the environment, an environmental impact report [(EIR)] shall be prepared." (CEQA, § 21080(d).) On the other hand, if the initial study demonstrates that the project "would not have a significant effect on the environment," either because "[t]here is no substantial evidence, in light of whole record" to that effect or the revisions to the project would avoid such an effect, the agency makes a "negative declaration," briefly describing the basis for its conclusion. (CEQA, § 21080(c)(1); Guidelines, § 15063(b)(2); Davidon, supra, 54 Cal.App.4th at p. 113.)

The Guidelines and case law further define the standard that an agency uses to determine whether to issue a negative declaration. "[I]f a lead agency is presented with a fair argument that a project may have a significant effect on the environment, the lead agency shall prepare an EIR even though it may also be presented with other substantial evidence that the project will not have a significant effect." (Guidelines, § 15064(f)(1), italics added.) This formulation of the standard for determining whether to issue a negative declaration is often referred to as the "fair argument" standard. (See Laurel Heights Improvement Assn. v. Regents of University of California (1993) 6 Cal.4th 1112, 1134-1135 (Laurel Heights II).)

3. Third Step in the CEQA Process

If no negative declaration is issued, the preparation of an EIR is the third and final step in the CEQA process. (Davidon, supra, 54 Cal.App.4th at p. 113; Guidelines, §§ 15063(b)(1), 15080; CEQA, §§ 21100, 21151.)

B

The Issue Presented Here Concerns the First Step in the CEQA Process

At issue in this case is only the first step in the CEQA process: whether the Project is exempt from further CEQA review because it falls under a categorical exemption. Here, the City concluded that the Project was exempt because it satisfied each of the elements of the categorical exception for urban in‑fill development set forth in Guidelines section 15332. (See Communities for a Better Environment v. California Resources Agency (2002) 103 Cal.App.4th 98, 126-130 [upholding the validity of Guidelines, § 15332].) Guidelines section 15332 states that urban in‑fill development is exempt from CEQA if it meets the following conditions (the urban in‑fill exemption):

"(a) The project is consistent with the applicable general plan designation and all applicable general plan policies as well as with applicable zoning designation and regulations.

"(b) The proposed development occurs within city limits on a project site of no more than five acres substantially surrounded by urban uses.

"(c) The project site has no value as habitat for endangered, rare or threatened species.

"(d) Approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality.

"(e) The site can be adequately served by all required utilities and public services."

The first issue in this appeal is whether the urban in‑fill exemption fails to apply by its own terms, either because (1) the Project is inconsistent with the applicable general plan; (2) the Project is not "substantially surrounded by urban uses"; or (3) approval of the Project would result in significant effects relating to traffic.^[9]

An exemption may also be inapplicable because of a blanket exception to the categorical exemptions, as set forth in Guidelines section 15300.2. According to this exception, "[a] categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances." (Guidelines, § 15300.2(c).) As the second main issue in this appeal, the Preservation Group contends there is a reasonable possibility that the Project will create a significant effect on the environment due to unusual circumstances, and thus the urban in‑fill exemption does not apply.

Based on the above, the two main issues in this appeal are (1) whether the urban in‑fill exemption applies according to its own terms; and (2) whether the exception to the exemption set forth in Guidelines section 15300.2(c) applies because there is a reasonable possibility of a significant effect on the environment due to unusual circumstances. Keeping in mind the two main issues in this appeal, we next examine the standards that apply to our review of the City's decision.

C

Applicable Legal Standards

CEQA establishes the basic standard of review in a mandamus proceeding. "The standard of review in an action to set aside an agency determination under CEQA is governed by [CEQA] section 21168 in administrative mandamus proceedings, and [CEQA] section 21168.5 in traditional mandamus actions. The distinction between these two provisions 'is rarely significant. In either case, the issue before the . . . court is whether the agency abused its discretion. Abuse of discretion is shown if (1) the agency has not proceeded in a manner required by law, or (2) the determination is not supported by substantial evidence.' " (County of Amador v. El Dorado County Water Agency (1999) 76 Cal.App.4th 931, 945 (County of Amador).)^[10]

1. The Standard Governing the City's Determination That No Exception to the

Urban In‑fill Exemption Applied

We first address the standard that applies to the City's determination that the exception set forth in Guidelines section 15300.2(c) was inapplicable, i.e., that there was no reasonable possibility of a significant effect to the environment due to unusual circumstances.

Continued in Part II …………

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^[1] All further statutory references are to the Public Resources Code unless otherwise indicated.

^[2] The Guidelines adopted by the Secretary appear at California Code of Regulations, title 14, section 15000 et seq. "[C]ourts should afford great weight to the Guidelines except when a provision is clearly unauthorized or erroneous under CEQA." (Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 391, fn. 2 (Laurel Heights I).)

For convenience, we will refer to both CEQA and Guidelines sections/ subdivisions in a shortened form, i.e., "CEQA section 21080(b)(1)" and "Guidelines section 15002(k)."

^[3] The Developer twice submitted and withdrew tentative maps indicating that the Project would be marketed as a condominium project. It is uncertain from the record, and the parties dispute, whether the Project will be an apartment project or a condominium project.

^[4] The original petition was filed on January 6, 2004. A first amended petition was filed on February 13, 2004.

^[5] At the time that the City's Development Services Department made this determination, there was no tentative subdivision map pending before it that would have indicated that the Project was intended to be a condominium project. As the parties explain, the construction of a condominium project would require discretionary approval by the City, while the construction of an apartment building would normally only require ministerial approvals. (See CEQA, § 21080(a) [including approval of a tentative subdivision map as a discretionary project]; Gov. Code, § 66424 [defining " '[s]ubdivision' " to include condominium projects].) The City's Development Services Department apparently concluded the Project required only ministerial approvals under the assumption that it would be an apartment building rather than a condominium.

^[6] CEQA section 21151(c) states: "If a nonelected decisionmaking body of a local lead agency certifies an environmental impact report, approves a negative declaration or mitigated negative declaration, or determines that a project is not subject to this division, that certification, approval, or determination may be appealed to the agency's elected decisionmaking body, if any."

^[7] Relevant to the City's Development Services Department's decision that the Project was exempt because it required only ministerial approvals, "the Legislature has determined that ministerial projects are exempt from CEQA review" as a statutory exemption. (Davidon, supra, 54 Cal.App.4th at p. 112, citing CEQA, § 21080(b)(1) & (2); Guidelines, §§ 15061(b)(2), 15260.)

^[8] CEQA section 21084(a) states that the Guidelines should include "a list of classes of projects which have been determined not to have a significant effect on the environment and which shall be exempt from this division."

^[9] The Preservation Group does not challenge the City's findings with respect to the elements of the urban in‑fill exemption that "[t]he project site has no value as habitat for endangered, rare or threatened species" and "[t]he site can be adequately served by all required utilities and public services." (Guidelines, § 15332(c) & (e).) It also does not challenge the City's finding on the portion of the "significant effects" element of the urban in‑fill exemption relating to "noise, air quality or water quality." (Guidelines, § 15332(d).) Because the Preservation Group does not raise challenges on those issues, we do not address them.

^[10] Case law defines "substantial evidence" supporting an agency's decision as " 'relevant evidence that a reasonable mind might accept as adequate support for a conclusion' " (Bhatt v. Depart. of Health Services (2005) 133 Cal.App.4th 923, 928 (Bhatt)) or "evidence of ' "ponderable legal significance . . . reasonable in nature, credible, and of solid value" ' " (Ofsevit v. Trustees of Cal. State University & Colleges (1978) 21 Cal.3d 763, 773, fn. 9). CEQA section 21080(e)(1) states: "For the purposes of this section and this division, substantial evidence includes fact, a reasonable assumption predicated upon fact, or expert opinion supported by fact."