Wal-Mart Stores, Inc. v. City of Turlock (2006) 138 Cal. App. 4th 273 Filed April 4, 2006. By Joel Ellinwood, AICP and Kate Hart For those awaiting a court’s interpretation of the standards of review and to see a court analysis of Section 21083.3 (Guidelines Section 15183) providing for a conditional exemption from CEQA for projects that are consistent with an approved general plan, the time has come. For those hoping to take advantage of the rollback prices at a new Wal-Mart Superstore in Turlock, the chance is sprung. Wal-Mart wanted to build a new store in the City of Turlock (“City”). In early 2003, Wal-Mart representatives inquired with City staff about developing a Wal-Mart Supercenter, which would include a full-service grocery department. The City staff provided Wal-Mart with entitlement and fee information as requested. A little less than a year later, on January 13, 2004, the City council amended the City’s zoning ordinance to prohibit the development of “Discount Super-stores” (e.g., stores with over 100,000 square feet of retail space and devote more than 5 percent of sales floor-area to nontaxable items such as groceries), and to require a conditional use permit for “Discount Stores” and “Discount Clubs.” After conducting a preliminary review, the City filed the notice of exemption with the county clerk on the grounds that (1) the ordinance was not a public project, (2) the project was consistent with a program EIR, (3) the project was consistent with the City’s general plan, and (4) a categorical exemption relating to the minor alteration of land use limitations applied. Wal-Mart sued the City claiming the City violated CEQA in approving its new ordinance and that the City should have prepared and certified an EIR. fn1 Prior to delving into its analysis of Section 21083.3/Guidelines Section 15183, the Court explained that in examining whether the adoption of the City’s ordinance was a “project” under CEQA, it assumed that the enactment of the ordinance was a project as defined by Section 21065. In doing so, it appears the Court wanted to get past the meddlesome statutory construction issues presented by Sections 21065 and 21080 (e.g, are all zoning amendments projects or not) and move on to the more important aspects of the case . . . the application of Section 21083.3 or Guidelines Section 15183. This section, which had only once before been alluded to (in dicta) in the Gentry v. City of Murrieta (1995) 36 Cal. App. 4th 1359, provides an opportunity for streamlined environmental review for projects which are consistent with a general plan for which an EIR was previously certified. In analyzing Section 15183, the Court first looked at whether the City’s adoption of the new zoning ordinance was consistent with the general plan and whether the impacts of the new ordinance were previously and adequately addressed in the City’s EIR for its general plan. The Court found that the City’s preliminary review was subject to the deferential standard of review contained in Public Resources Code § 21168.5, known as “prejudicial abuse of discretion.” To establish an abuse of discretion, the petitioner must show that the agency did not proceed in a manner required by law or that the decision was not supported by substantial evidence. The Court noted Wal-Mart never contended the City’s ordinance was inconsistent with the general plan and skipped to step two of its analysis. Step two of the Court’s analysis focused on whether the City could piggy-back off its EIR for the general plan. The Court stated that the adoption of the zoning ordinance would not be covered by the EIR certified for the City’s general plan if Wal-Mart could present substantial evidence to support a fair argument to show there were reasonably foreseeable project-specific impacts that would create a significant change in the environment peculiar to (e.g., belonging exclusively to) the zoning or its site. One might ask where the “reasonably foreseeable” language came from. The Court reasoned that enacting a zoning ordinance would not result in any direct physical changes. The only other type of change to be considered is an indirect physical change, but such a change should only be considered if the change is a “reasonably foreseeable” impact which may be caused by the project pursuant to Guidelines Section 15064. The Court commented that “a physical change is identified by comparing existing physical conditions with the physical conditions that are predicted to exist at a later point in time, after the proposed activity has been implemented.” 138 Cal. App. 4th 273, 289. As one might expect, Wal-Mart argued that the City’s prior EIR did not evaluate the significant environmental effects peculiar to the ordinance or the potentially significant off-site impacts created by the ordinance. But, according to the Court, Wal-Mart couldn’t prove it. Despite having submitted a number of letters from attorneys speculating about future potential development which would result from the ordinance, as well as various traffic analyses and reports prepared by traffic and environmental consultants averring the ordinance would produce significantly more vehicle trips, and thus traffic congestion, in comparison to the impacts that one Wal-Mart Superstore might produce, the Court wouldn’t buy it. After examining the evidence, the Court identified critical analytical gaps existed between the scope of the studies prepared by Wal-Mart and the requirement to show evidence of a project-specific change in the environmental impact peculiar to the zoning ordinance. The only obvious project-specific result peculiar to the ordinance was that discount superstores would no longer be permitted; all other development options that existed prior to the adoption the ordinance would remain the same. Ultimately, the Court found that Wal-Mart’s letters and studies were predicated on assumptions not supported by evidence in the record. For instance, the Court pointed out that there was no evidence to support a finding that the zoning ordinance was enacted to achieve a multi-tenant commercial development plan at the site in question, nor was there any evidence that another developer desired to develop a multi-tenant shopping center at the location in question. The Court held that because no reasonably foreseeable project-specific impacts to the environment would occur on the site, the City properly adopted the zoning ordinance by piggy-backing off the prior EIR for the City’s general plan. Lastly, the Court addressed Wal-Mart’s contention that the prior EIR did not address the offsite and cumulative impacts that would flow from the adoption of the City’s zoning ordinance. Specifically, Wal-Mart contended the new zoning ordinance would cause superstore-type developers such as itself to build in the county’s jurisdiction on the outskirts of the City, thus drawing thousands of daily car trips to the location. Nevertheless, the Court found Wal-Mart had not submitted any evidence to show that it (or any other developer) intended to or could construct a supercenter on the outskirts of the City in accordance with any existing general plan and commercial development zoning designations outside the City. Since no evidence in the record indicated what development might take place outside of the City limits due to the ordinance, the Court found that any evaluation of offsite and cumulative impacts would be impossible to prepare. It appears that Wal-Mart or its attorneys assumed too much in constructing the alternative development scenarios for its consultants to analyze. Previously the common wisdom was that the “fair argument” standard was a low threshold, that took relatively little to satisfy. Wal-Mart had a howitzer load of evidence, but aimed in the wrong direction to score a hit. This case is important because there is now a published case wherein a Court has held that the two-tiered standard of review for the two different elements of Section 21083.3 is proper. fn2 In sum: * the substantial evidence test applies to the first element of whether the project is consistent with the general plan or zoning and whether uniformly applied development policies or standards will substantially mitigate a particular effect addressed in the general plan EIR; and * the fair argument test applies to the determination of whether the project has impacts peculiar to the project and which were not addressed as significant effects in the prior EIR or that substantial new evidence shows will be more significant than describe in the prior EIR or whether there are potentially significant offsite or cumulative impacts not discussed in the general plan EIR. This decision is important because it could encourage the streamlining of the CEQA process and reducing the need for duplicative environmental studies and reports. More specifically, perhaps more agencies will become more comfortable with and amenable to the idea of “tiering” off a program EIR. However, this decision may also be important in stressing the idea of building a record. The Turlock planners prepared a thorough, well-reasoned and documented preliminary review and the City adopted detailed findings in support of the exemption. The level of detail and depth analysis was equal to best practices for certification of an EIR. The extra work up front paid off for the City. Admittedly, this opinion is somewhat disturbing in that it illustrates the power of discretion, and perhaps the weakness of CEQA. While many believe that Section 15183 has significant purpose and should be used to streamline CEQA to reduce or limit duplicative environmental studies, one might argue that the Court was result-oriented. Did Wal-Mart really assume facts not in evidence? Ultimately, the Court’s findings on the evidentiary issues make sense. When the Court says that Wal-Mart’s documents merely assume a multi-tenant shopping center will be built on the site in question, the Court is right. After all, Wal-Mart could just as easily submit an application for a Discount store in the same spot it was eyeing for a superstore. At least this way, the citizens of Turlock wouldn’t have to drive so far for the smiley face rollback price signs. fn1 Wal-Mart also challenged the constitutional validity of the ordinance alleging the City exceeded its police powers, but the Court dispensed with this claim swiftly, finding that the City’s ordinance was “rationally related to a legitimate public purpose.” This case is just the latest of a series of CEQA skirmishes stemming from community-based resistance to big-box retail and retail-clerks union opposition to Wal-Mart’s push into the grocery business. See, e.g. Impact Fee Programs as Effective Tools for CEQA Mitigation: An Update, , Men are from Mars, Women are from Venus, and Wal-Mart is from Pluto, and Anderson First: Evaluation of Blight and Effective Mitigation. Both sides have picked up CEQA as their weapon of choice with uneven success. fn2 In the 1995 case of Gentry v. City of Murrieta, 36 Cal.App.4th 1359, the Court stated in dicta that the second prong of analysis under Section 21083.3 (whether the project has impacts peculiar to the project and which were not addressed as significant effects in the prior EIR, or that substantial new evidence shows will be more significant than described in the prior EIR, or whether there are potentially significant offsite or cumulative impacts not discussed in the general plan EIR) should be subject to only the fair argument test; however, no case since Gentry has revisited the issue. Joel Ellinwood, AICP is a senior associate and Kate Hart is an associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595. The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.