California Appellate Court Upholds Negative Declaration for County "Up-Zoning" Ordinance

HIGHLIGHTS:

• The Sixth District Court of Appeal's recent decision in Aptos Council v. County of Santa Cruz provides useful California Environmental Quality Act (CEQA) guidance to lead agencies considering legislation that would relax existing land-use restrictions on new development.
• Under Aptos Council, CEQA requires a lead agency to evaluate the potential impacts of future development under a new regulatory regime only if there is substantial evidence in the record that future development is reasonably foreseeable. In the absence of such evidence, a lead agency need not evaluate the impacts of future development prior to adopting the new regulations, provided it adequately investigates whether such development is likely to occur.
• Aptos Council also clarifies application of CEQA's "piecemeal review" doctrine in the context of zoning ordinance amendments.

Spurred in part by a desire to reduce vehicle miles traveled and corresponding greenhouse-gas emissions, many local agencies are in the process of revising zoning ordinances and land use regulations to relax restrictions on high-density projects near job centers and transit corridors. In Aptos Council v. County of Santa Cruz, published on March 30, 2017, California's Sixth District Court of Appeal upheld, under the non-deferential "fair argument" standard of review, a negative declaration prepared for an ordinance that "up-zoned" property to allow for higher-density hotel development with reduced parking. Notably, the court held that the California Environmental Quality Act (CEQA) does not require a lead agency to analyze the potential environmental effects of future development authorized by relaxed land-use restrictions in the absence of substantial evidence that future development is reasonably foreseeable. This case thus provides important guidance to local agencies regarding the extent of environmental review required for zoning amendments that increase density and reduce barriers to growth. This case also holds that a lead agency does not engage in improper "piecemeal" environmental review when it treats multiple zoning amendments as separate CEQA projects when such amendments operate independently and each serves a unique legislative purpose.

Case Background

At issue in Aptos Council were three ordinances adopted by the Santa Cruz County Board of Supervisors as part of a long-range "regulatory reform" process first proposed by the planning department in 2010 to modernize, clarify and streamline county development standards and permit requirements. Ordinance 5181, adopted in January 2014, expands application of previously adopted "minor exceptions" to certain development standards and setback requirements with an administrative permit approval. The second ordinance, Ordinance 5171, also adopted in January 2014, relaxes the county's hotel room density restrictions, hotel parking requirements and hotel height limitations. The third, Ordinance 5172, adopted in March 2014, eliminates certain variance and public hearing requirements for exceptions to the county sign standards and authorizes administrative approval of such exceptions with public notice.

For purposes of CEQA compliance, the county processed the ordinances as three separate "projects" and pursued different compliance pathways for each. For Ordinance 5181, the county prepared an addendum to a 2010 negative declaration for a previously approved zoning amendment that established the "minor exceptions" extended by Ordinance 5181. For Ordinance No. 5171, the county adopted a new negative declaration that determined the ordinance would not cause a significant effect on the environment. For Ordinance 5172, the county relied on various statutory and categorical CEQA exemptions.

Following adoption of Ordinance 5172, Aptos Council, an unincorporated community organization, sought a writ of mandate in the trial court, claiming that 1) the negative declaration for Ordinance 5717 was inadequate under CEQA, and 2) the county engaged in "piecemeal" environmental review by treating the ordinances as three separate CEQA projects. The trial court denied the writ petition on all grounds and the Court of Appeal affirmed.

Court Upholds Negative Declaration Under "Fair Argument" Standard

The court rejected the appellant's argument that the negative declaration prepared for Ordinance 5171 was inadequate. As discussed above, Ordinance 5171 relaxes the county's hotel room density restrictions, hotel parking requirements and hotel height limits. The negative declaration and its corresponding initial study determined that the ordinance could increase the number of county hotel rooms with fewer parking spaces, and would allow four-story hotels in areas previously zoned for three-story structures. Nevertheless, the negative declaration determined that the project would not cause any significant environmental effects because its regulatory text amendments would have no direct impact, and the potential indirect impacts resulting from future hotel development under the ordinance were presently unknown and would be subject to future discretionary approval and CEQA review.

On appeal, the appellant argued that the negative declaration violated CEQA because it failed to evaluate impacts associated with future hotel uses approved under Ordinance 5717, citing CEQA case law that generally requires such analysis for projects that reduce barriers to future development. In rejecting the appellant's argument, the court acknowledged that negative declarations are subject to the non-deferential "fair argument" standard of judicial review, which requires preparation of a full environmental impact report when there is substantial record evidence to support a fair argument that a project may cause a significant environmental effect. However, the court held that its "initial inquiry is not whether a fair argument that a significant environmental impact may result from the project exists; rather, it is whether the negative declaration and corresponding initial study should have taken into account the impacts of future development."

The court held that CEQA only requires consideration of "reasonably foreseeable indirect physical changes in the environment which may be caused by the project" and that "[a] change which is speculative or unlikely to occur is not reasonably foreseeable," citing CEQA Guideline § 15064 (emphasis added). The court explained that the county investigated the potential for hotel development under the ordinance by conducting an inventory of available development sites and interviewing the owners of such sites to determine whether they had any plans for hotel development. Since the county's investigation determined that no hotel development was presently being proposed, as demonstrated by the administrative record, the court held that the environmental review of hypothetical, unspecified hotel projects under the ordinance would be a speculative exercise that is not required by CEQA.

The court distinguished case law cited by appellants on the basis that, in those cases, there was substantial record evidence the projects would result in reasonably foreseeable development, or that the lead agency failed to investigate the likelihood of such development. The Aptos Council administrative record contained no such evidence and the court thus determined that the appellant's reliance on the cited cases was misplaced. Since the appellant could not point to evidence in the record demonstrating that Ordinance 5717 would cause reasonably foreseeable hotel development, and could thus only speculate as to its potential impact on the environment, the court held that the appellant failed to adequately support its "fair argument" claim and upheld the negative declaration.

Court Rejects Appellant's CEQA "Piecemeal Review" Argument

The appellant also argued that the county violated CEQA when it treated each of the challenged ordinances as separate projects for the purposes of environmental review. According to the appellant, each of the ordinances furthered a single legislative purpose – i.e., overhauling the county zoning code per the regulatory reform effort first proposed in 2010 – and thus should have been considered a single "project" for purposes of environmental review. The court soundly rejected this argument, relying principally on Laurel Heights Improvement Association v. Regents of the University of California (1988) 47 Cal.3d 376, 390 (Laurel Heights).

Per CEQA Guideline §15378(a), the term "project" means the "whole of an action, which has the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect change in the environment" (emphasis added). This broad definition is intended to avoid so-called "piecemeal" environmental review whereby a large project with significant adverse effects is partitioned into several small projects, each with nominal adverse environmental effects, thereby masking the true environmental consequences of the whole action. Consistent with this principle, the Laurel Heights court held that a CEQA document "must include an analysis of the environmental effects of future expansion or other action if (1) it is reasonably foreseeable consequence of the initial project; and (2) the future expansion or action will be significant in that it will likely change the scope and nature of the initial project or its environmental effects."

The court acknowledged evidence in the record that the challenged ordinances were adopted as part of the county's overall regulatory reform program. Nevertheless, it held that, under Laurel Heights, the county had not engaged in piecemeal review of their environmental effects because amending certain zoning requirements, such as those regulating hotel height and parking, is not a reasonably foreseeable consequence of amending different zoning requirements, such as those regulating signs and minor exceptions. According to the court, even if the challenged ordinances can be characterized as part of the county's larger regulatory reform effort, they each serve a different purpose. Since each ordinance operates independently of the others, their respective environmental consequences can be independently reviewed without violating CEQA.

Conclusion

This case provides useful guidance to lead agencies considering legislation that would relax existing restrictions on new development. Under Aptos Council, CEQA requires a lead agency to evaluate the potential impacts of future development under a new regulatory regime only if there is substantial evidence in the record that such development is reasonably foreseeable. In the absence of such evidence, a lead agency need not evaluate the impacts of future development at the time it adopts the new regulations, provided it adequately investigates whether such development is likely to occur and documents the investigation findings in the administrative record. By clarifying CEQA's "piecemeal review" doctrine in the context of zoning amendments, this case also provides welcome guidance to local agencies who wish to update their zoning codes in a comprehensive manner, but on an intermittent schedule. 
  

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