Real Estate and Land Use

A Rare Win for Former Redevelopment Agencies—State Collection Procedures Ruled Unconstitutional

City of Bellflower v. Michael Cohen, Director of the Department of Finance (245 Cal. App. 4th 438)

Author: Roger A. Grable

Why It Matters: Under the redevelopment dissolution law, the State directed former redevelopment agencies to distribute agency funds to the county auditor-controller for allocation to local taxing entities except to the extent required to meet agency enforceable obligations. If an agency fails to do so, the remedies include authority for the Board of Equalization to withhold sales and use tax revenues from the agency and for the county auditor-controller to withhold property taxes. Both of these remedies were held to be unconstitutional by the Court of Appeal as violating the provisions of Proposition 22 (2010).

Facts: This challenge is a facial challenge to these collection provisions. A facial challenge is different from an as-applied challenge (i.e., challenging how the law is applied to a specific situation). Facial challenges are more difficult in that the party challenging the law bears a heavier burden of proof than that applicable to an as-applied challenge. Here, several cities, joined by the League of California Cities, elected to pursue the facial challenge. The basis of their challenge was voter-enacted Proposition 22 which limited the power of the Legislature to "reallocate, transfer, borrow, appropriate, restrict the use of, or otherwise use the proceeds of any tax imposed or levied by a local government solely for local government purposes." Cal. Const. Article XIII, Section 24.

Proposition 22 was proposed by California cities in 2010 as a result of the fact that the State has previously raided local tax revenues to cover revenue shortfalls at the State level. While the dissolution of redevelopment agencies was designed to achieve this result to some degree, the California Supreme Court upheld the authority of the Legislature to dissolve the agencies. The statute in question, Health and Safety Code Sections 34179.5 and 34179.6, established a procedure where the Department of Finance ultimately determined what obligations were enforceable under the law and what revenues must be allocated to local taxing entities, and established the challenged remedies for a failure to comply with the Department's determination.

Two trial courts had reached different conclusions as to the constitutionality of these remedies. The Court of Appeal sided with the unconstitutional side of the issue, finding that the language of Proposition 22 was an unambiguous prohibition of the State's ability to divert local taxes for any purpose whether or not the taxes may have been wrongfully withheld. In its ruling the Court noted that these two remedies were not the exclusive means of enforcing the provisions of the dissolution of redevelopment agencies.

Practice Pointers: This is clearly not the end of the dispute. What other remedies the State may seek to employ or enact are unknown at this time but are a virtual certainty.

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"Feelings" Are Not Environmental Impacts Under CEQA

Preserve Poway v. City of Poway (March 9, 2016, D066635)

Why It Matters: This case addresses a unique issue under CEQA relating to whether a project's psychological and social impacts on community character are relevant concerns in an environmental analysis. This decision holds that to the extent community character involves aesthetics, CEQA requires such impacts to be examined. However, CEQA does not require an analysis of subjective psychological feelings or social impacts resulting from a project.

Facts: Harry Rogers, a resident of the City of Poway (Poway), had been operating a horse boarding facility called the "Stock Farm" on his property for 20 years. Over the years, the Stock Farm had become inextricably tied to Poway's horse-friendly community character. Rogers ultimately decided he wanted to close down the Stock Farm and build 12 homes in its place (the Project), which was permissible under existing zoning regulations. The proposed Project would not lead to any reduction in Poway's horse population. Closing the Stock Farm, however, concerned various members of the community, particularly members of the Poway Valley Riders Association (PVRA), whose 12-acre rodeo, polo and other grounds are located directly across the street from the Stock Farm.

Despite objections from community members, the City Council voted unanimously to approve the Project under a mitigated negative declaration (MND). While the MND that was prepared revealed that the Project would create significant environmental impacts on hydrology/water quality, biological resources, utilities and service systems, and cultural resources, the Project proponents agreed to mitigation measures that would reduce the impacts to a less-than-significant level. Further, the MND found that the Project would have no impacts on aesthetics.

Subsequently, Project opponents formed Preserve Poway (the Preserve) and brought suit, presenting ten distinct causes of action. Seven of the ten causes of action were found not to have been sufficiently raised at the administrative level and were deemed to have been waived for litigation purposes. The court denied two additional causes of action, but granted the cause of action in which the Preserve alleged that the Project would have a significant effect on Poway's community character since the closure of the Stock Farm would cause psychological and social impacts to Poway residents who viewed the Stock Farm as a long-standing community resource. Specifically, the Preserve argued that CEQA requires an environmental impact report (EIR) to be prepared instead of an MND for the Project. The trial court ruled that an EIR was necessary because there was substantial evidence that the Project's elimination of the Stock Farm may have a significant impact on Poway's horse-friendly community character as the "City in the Country."

The Decision: The Court of Appeal reversed the trial court's decision finding that an EIR was not required to study the psychological and social impacts of the Project because CEQA serves to address physical changes in the environment.

In order to determine that an EIR must be prepared, CEQA requires that it be demonstrated that a project may have a significant environmental impact. The Preserve argued that a significant impact existed because the Project would severely impact the community character of Poway. Specifically, the Preserve alleged that the "residents' sense of well-being, pleasure, contentment, and values that come from living in the 'City in the Country' " would be impacted.

In dismissing the Preserve's claims, the court emphasized that community character is not defined in CEQA or the Guidelines, and its discussion has been limited to aesthetic impacts. The court noted that aesthetic impacts have been properly recognized under CEQA in connection with impacts on public and private views, and on the historic character of a project site and surrounding area. For instance, in Eureka Citizens for Responsible Government v. City of Eureka (2007) 147 Cal.App.4th 357, the aesthetic impacts of a colorful school playground on the "historic character" of the neighborhood were determined to have been properly addressed within an EIR. In the case at hand, however, the court explained that the community character issues raised by the Preserve go well beyond aesthetic impacts—the community character that is at issue is "a matter of what is pleasing to the psyche." The court stressed that CEQA does not require an analysis of subjective psychological feelings or social impacts, as the primary goal is to protect the physical environment. Further, the court acknowledged that the trial court did not invalidate the Project's MND on aesthetic grounds.

In reviewing analogous provisions of the federal National Environmental Policy Act (NEPA) and other jurisdictions' environmental laws, the court found further justification that CEQA does not require that Poway study the psychological and social impacts that result from the Project. Under NEPA, the Supreme Court has held, "Neither the language nor history of NEPA suggests that it was intended to give citizens a general opportunity to air their policy objections to proposed federal actions. The political process, and not NEPA, provides the appropriate forum in which to air policy disagreements." Metropolitan Edison Co. v. People Against Nuclear Energy (1983) 460 U.S. 766, 777. Further, in analyzing New York State's analogue to CEQA, the court noted that the New York law defines "environment" to expressly include "existing community or neighborhood character." N.Y. Envtl. Conserv. Law § 8-0105 (2014). The court thus distinguished CEQA, which does not include social or economic effects on community character within the definition of "environment."

PVRA Impacts on the Project Do Not Require an EIR. In addressing whether the horses, trucks, and horse trailers associated with PVRA's activities could have a negative impact on the future residential uses of the Project, the court looked to the recent decision in California Building Industry Association v. Bay Area Air Quality Management District (2015) 62 Cal.4th 369 (CBIA) for guidance. In CBIA, the Supreme Court considered whether CEQA requires an agency to consider the effects of existing environmental conditions on a proposed project's future users or residents. The Court held that "CEQA does not generally require an agency to consider the effects of existing environmental conditions on a proposed project's future users or residents." Id. at 392. Following CBIA, the court held that Poway was not required to analyze the impact of the existing environmental conditions (PVRA's activities) on the Project's future users or residents.

Issues Regarding the Inadequacy of the MND Are Forfeited Because the Preserve Did Not Cross-Appeal. Finally, the Preserve contends that even if the trial court erred in ordering Poway to set aside its adoption of the MND on the grounds of community character, the judgment should be affirmed on the grounds that the MND is deficient as to public safety, and wetlands and biological issues. In dismissing these claims, the court emphasized that the Preserve must have filed a notice of appeal and become cross-appellants in order to obtain affirmative relief by appeal.

Practice Pointers:

  • A project's impacts on community character are generally inapplicable when determining whether a project has a significant environmental impact, unless the community character issues are aesthetic in nature. In the future it can be expected that similar challenges will be couched in terms of aesthetic impacts.
  • The "reverse CEQA" decision in CBIA will continue to be helpful in limiting the scope of environmental analysis of the existing environment on projects.
  • Relief will not be granted for issues that are not the subject of an appeal.

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