Client Alert

Potential for "Urban Decay" Must Be Analyzed Under CEQA

7/17/2006

Water contamination and air pollution, now recognized as very real environmental problems, initially were thought to be nothing more than the exaggerated concerns of overly enthusiastic environmentalists. Similarly, experts are now warning about land use decisions that may cause a chain reaction of store closures and long-term vacancies, ultimately creating social and economic impacts that can destroy, or cause severe deterioration in, existing neighborhoods.

Typically, social and environmental effects caused by a project are not subject to review under the California Environmental Quality Act (CEQA) because the Act applies only to a project’s environmental effects. However, two recent cases reviewing "big-box" retail projects have held that when there is evidence that the social and economic effects caused by a project could result in a reasonably foreseeable environmental impact, such as urban decay, this indirect effect must be analyzed under CEQA.

In the first case, Bakersfield Citizens for Local Controlv.City of Bakersfield, the City of Bakersfield prepared Environmental Impact Reports (EIRs) for two shopping centers located 3.6 miles apart. Both shopping centers were to contain Wal-Mart Supercenters (a Wal-Mart store combined with a supermarket that generally is open seven days a week, 24 hours a day), plus a variety of other large and small retail businesses.

The Fifth District Court of Appeal rejected the EIRs for both shopping centers because, among other deficiencies, they failed to evaluate potential urban decay impacts. The court stated that a proposed new shopping center does not trigger a presumption that decay will occur as a result of other businesses being closed. However, evidence – including a professional report – had been introduced suggesting that the economic impact of the shopping centers would trigger the environmental effect of urban decay. The court held that when such evidence is introduced, an EIR must evaluate that issue. The BakersfieldEIRs did not include even short statements indicating why decay impacts would be less than significant.

The Third District took a similar approach in Anderson First Coalitionv.City of Anderson,which involved a challenge to an EIR for a 26.5-acre retail shopping area that also included a Wal-Mart Supercenter. Repeating the tactic used in the Bakersfield case, project opponents submitted studies and asserted that the project would cause urban decay in the City’s central business district. However, the court concluded that the EIR fully evaluated this claim and determined that it had no factual basis. The EIR reached this conclusion by relying on an economic analysis that evaluated the project’s impacts on other businesses, thus determining that the City’s downtown contained smaller stores typically serving local residents, while the Wal-Mart Supercenter would be geared toward the regional market and would also attract customers who are currently shopping in other towns. The EIR also explained that a redevelopment district had been established to control blight in the area, and that the downtown might actually be improved due to the tax increment monies derived from the project, which could be used to revitalize the area.

The Anderson court distinguished the Bakersfield case, where the lead agency had addressed urban decay studies and comments in the record by claiming such impacts were merely social and economic and, thus, outside the realm of CEQA. Whereas Bakersfield merely held that the EIR was inadequate due to the failure to consider the effects of urban decay, the Anderson case actually studied and responded to the claims, thus providing valuable insight into what a lead agency must do to evaluate urban decay impacts in order to satisfy CEQA.

The Bakersfield court also held, distinguishing several prior cases, that the end user of a "big-box" facility must be identified in the EIR. The court explained that when the particular type of retail business – such as a Supercenter – will have unique or additional adverse impacts, then disclosure of the type of business is necessary in order to accurately recognize and analyze the environmental effects of the proposed project. Further, the Bakersfield case established, even though a project may already be substantially completed, this does not render the issue of CEQA compliance moot. The court acknowledged that the completed portion of the construction generated substantial economic and psychological pressures to allow the shopping centers to complete all of the previously approved construction. The court declined this option for several reasons, including the developers’ express recognition that they were proceeding at their own risk when they relied on contested project approvals, and the City’s discretion to reject either or both of the shopping centers after further environmental study.

These two decisions illustrate a fundamental principle about the preparation of environmental documents for "big-box" stores and other large retail projects. Where a lead agency is presented with credible evidence of potential environmental impacts due to urban decay, the agency must evaluate that issue in an EIR. Moreover, the project proponent, in preparing the EIR, should provide a factual basis for the EIR evaluation, rather than merely a legal basis. Reviewing courts generally defer to lead agencies on factual determinations, while they are more likely to independently review legal conclusions. An EIR that includes a factual evaluation as part of its analysis of impacts and in its responses to comments is more likely to survive a litigation challenge.

 


Case Citations

BakersfieldCitizens for Local Controlv.City of Bakersfield,124 Cal. App. 4th 1184 (2004).

AndersonFirst Coalitionv.City of Anderson,130 Cal. App. 4th 1173 (2005).

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