In a published opinion filed August 29, 2014, the Fifth District Court of Appeal affirmed a judgment granting a writ of mandate and finding that the City of Fresno erred in approving a mitigated negative declaration (MND) for an infill project involving the demolition of two houses and construction of 14 duplexes on a 1.29-acre lot in downtown Fresno.  Citizens for the Restoration of L Street v. City of Fresno (FFDA Properties, LLC, et al., Real Parties in Interest)(5th Dist. 2014) __ Cal.App.4th ___, Case No. F066498.  In resolving the cross-appeals before it, the Court of Appeal agreed with the trial court in holding that:  (1) the City violated CEQA’s procedural requirements by allowing – as required by its Municipal Code – its Historic Preservation Commission (HPC) to act as its decisionmaking body in approving the demolition permit for the project while not concurrently delegating CEQA review authority to that body; and (2) the City properly applied the “substantial evidence” – rather than the “fair argument” – standard of review in determining that the demolished houses were not “historical resources” and therefore not part of the “environment” protected by CEQA.

With respect to its first holding, the Court found that while CEQA allows a lead agency, such as the City, to delegate the authority to approve an MND and project to a non-elected decisionmaking body such as the HPC, the City’s Municipal Code here did not do so, but instead improperly split project approval authority (which was vested in the HPC under the Code) from environmental review authority (which the Code did not delegate to the HPC).  Citing its recent decision in POET, LLC v. State Air Resources Bd. (2013) 218 Cal.App.4th 681, 731, the Court stated: “A decisionmaking body’s responsibilities include more than just approving the project.  It must also consider and adopt the environmental review document – in this case, the mitigated negative declaration.  [citation]. The decisionmaking body obtains the authority to adopt a mitigated negative declaration and approve a project as a result of the assignment or delegation of that authority by the lead agency.  Lead agencies such as the City may delegate both types of authority to a nonelected, subordinate body, provided that they also provide for an appeal to the lead agency’s elected decisionmaking body, if any.”  (Citing Pub. Resources Code, § 21151(c).)

Here, the City failed to proceed in the manner required by law because, as defined by the City’s Municipal Code, the HPC’s powers did not include the authority to approve the MND. Further, the City failed to cure this legal defect in its procedures when the City Council undertook a de novo review and approved the MND and project itself, because in doing so it violated CEQA’s procedural requirements for adopting an MND — specifically, it failed to provide the requisite notice to the public and other agencies of its intention to adopt the MND and failed to provide a 20-day public review period prior to its adoption.

In the second part of its opinion, the Court affirmed the analysis of its prior decision in Valley Advocates v. City of Fresno (5th Dist. 2008) 160 Cal.App.4th 1039, 1069-1072, rejecting plaintiff’s invitation to depart from that precedent and apply the “fair argument” standard to what the court termed “the threshold question of whether a threatened building or site is an “historical resource” for purposes of CEQA.”  As a preliminary matter, the Court gave short shrift to the City’s argument that the case was moot because the challenged historicity determination had been rescinded and replaced by the City’s later resolutions adopted to comply with the trial court’s writ; effective relief could still be granted because if the Court were to agree with plaintiff it could order the trial court to vacate its writ and issue a new one requiring an EIR, which might lead to project changes or removal, or to the adoption of additional mitigation measures.  Turning to the Court’s substantive analysis, it was grounded in the premise that “a man-made building would qualify as part of the environment [as defined and protected by CEQA] if it is an object of historic significance.”  According to the Court: “The question whether a building is an “historical resource” for purposes of CEQA and thus part of the “environment” can be conceptualized as a threshold question that must be resolved by the lead agency in order to complete its preliminary review [under CEQA].”  The Court held this conceptualization of the issue was the correct one, based on its statutory interpretation of Public Resources Code § 21084.1, the primary provision of CEQA that addresses historical resources, and other relevant provisions.  According to the Court, “the legislative history demonstrates a legislative intent to allow a lead agency to make a discretionary decision about the historic significance of certain resources – a decision that would preclude the need for an EIR or a mitigated negative declaration.  Such a decision would need to be made during the first stage of the CEQA review so that the lead agency could determine (1) whether the proposed activity was a project that might cause a direct physical change in the environment and (2) whether the project, if any, was exempt from CEQA.  Making a discretionary determination during the preliminary review is antithetical to plaintiff’s position that only a fair argument that an object is an historical resource is needed to require the lead agency to prepare an EIR before approving the demolition of that object.”

The Court thus concluded that “the Legislature intended the question of historic significance to be resolved early in the environmental review process, an approach that would avoid the delays and expense of an EIR in cases where the lead agency exercises its discretion by concluding the building or other object in question is not an historical resource.  …[D]uring the preliminary review stage of a CEQA review, the fair argument standard does not apply to the question of whether a building or other object qualifies as an historical resource for purposes of CEQA.  [citing Valley Advocates.]  Rather, the question whether an object is an historical resource and thus part of the environment protected by CEQA must be resolved by the lead agency, under the three analytical categories established by section 21084.1 and Guidelines section 15064.5, subdivision (a) [fn. omitted], before it applies the fair argument standard to determine whether the project may have a significant adverse impact on the environment.”

In rejecting plaintiff’s remaining arguments, the Court found plaintiff’s analogy between historic resources and biological resources to be inapt: “Plaintiff equates the question whether a project site contains a building that is an historical resource with the question whether a project site contains habitat of an endangered plant or animal and contends that the same standard should be applied to both questions.  The flaw in this argument is that the questions are not equivalents.  Whether a project site contains habitat of an endangered plant or animal is subject to CEQA’s general provisions.  In contrast, the Legislature enacted a specific section of CEQA to address historic resources.  (§ 21084.1.)  In short, different standards apply because the two questions are governed by different statutes.”

What are this case’s key “takeaways”?  The first portion of Court of Appeal’s decision (regarding the impropriety of the HPC’s approval of the MND) appears a bit ironic.  The HPC seems to have done what CEQA says it should do (i.e., approve the project (demo permit) and the MND) but since the latter action was ultra vires under City’s Municipal Code it was invalid — even though the Code’s relevant provisions improperly split project approval and environmental review authority in violation of CEQA.  The lesson appears to be that local agencies should have their legal counsel carefully review their Codes to ensure that the provisions delegating and defining the powers and authority of subordinate decisionmaking bodies within the lead agency are CEQA-compliant.  With respect to the second portion of the Court’s opinion, the “bottom line” is that it helpfully confirms that where CEQA commits the determination of the historicity of resources to the lead agency’s discretion, the standard of judicial review of that determination remains the deferential “substantial evidence” standard.