Chico Advocates for a Responsible Econ. v. City of Chico

• Decision Date: 05 September 2019
• Docket Number: C087142
• Citation: 40 Cal.App.5th 839,252 Cal.Rptr.3d 859
• Court: California Court of Appeals Court of Appeals
• Parties: CHICO ADVOCATES FOR A RESPONSIBLE ECONOMY, Plaintiff and Appellant, v. CITY OF CHICO, Defendant and Respondent; Walmart Inc., Real Party in Interest and Respondent.

40 Cal.App.5th 839

252 Cal.Rptr.3d 859

CHICO ADVOCATES FOR A RESPONSIBLE ECONOMY, Plaintiff and Appellant,

v. CITY OF CHICO, Defendant and Respondent;Walmart Inc., Real Party in Interest and Respondent.

C087142

Court of Appeal, Third District, California.

Filed September 5, 2019

Certified for Partial Publication.^*

Shore, McKinley, Conger & Jolley, Brett S. Jolley, Stockton, and Becky R. Diel for Plaintiff and Appellant.

Alvarez-Glasman & Colvin, Stephen T. Owens, and Christy M. Garcia for Defendant and Respondent.

Sheppard, Mullin, Richter & Hampton, Arthur J. Friedman, and Alexander L. Merritt, San Francisco, for Real Party in Interest and Respondent.

KRAUSE, J.

This appeal involves a challenge under the California Environmental Quality Act (CEQA) ( Pub. Resources Code, § 21000 et seq. )¹ to a project proposing to expand an existing Walmart store by approximately 64,000 square feet (the Project). Years earlier, Walmart Stores, Inc. (Walmart), had proposed a larger expansion project that would have increased the size of the store by approximately 98,000 square feet. In 2009, the City of Chico (City) declined to approve that project.

In 2015, Walmart returned to the City seeking approval of the current Project. After preparing a new environmental impact report (EIR), which showed the Project would have a significant and unavoidable traffic impact, the City certified the EIR and approved the Project. The City also adopted a statement of overriding considerations, concluding that the benefits of the Project outweighed its one unavoidable environmental impact.

Plaintiff Chico Advocates for a Responsible Economy (CARE) filed a petition for writ of mandate challenging the City's environmental review and approval of the Project, but the trial court denied the petition. CARE now appeals the judgment denying its petition, arguing the trial court erred in denying the petition because (1) the EIR failed to adequately evaluate the Project's urban decay impacts and (2) the City's statement of overriding considerations is deficient. We will affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

The Project

The Project approved by the City will expand an existing Walmart store in Chico, California. The Project is located within a regional retail center that borders the east side of State Route 99, which includes the Chico Mall as well as numerous national chain retail stores. Less than one mile west of the Project, on the other side of State Route 99, is another retail shopping center, which includes a FoodMaxx discount supermarket. A number of other discount food shopping options also are clustered in the general area near the Project.

The existing Walmart store is 131,302 square feet in total area. The Project will expand the store by approximately 64,000 square feet, add an eight-pump gas station, and create two new outparcels (totaling 5.2 acres) for future commercial development. Most of the expanded space—about 49,000 square feet—will be used for grocery-related sales and support. The remainder of the new space will be used for general merchandise sales and storage.

In 2009, the City denied an earlier proposal by Walmart to expand the store by approximately 97,556 square feet, together with a 12-pump gas station and one outparcel (totaling 2.42 acres). An EIR prepared in connection with the first proposal showed that even after implementation of feasible mitigation measures the project would have significant and unavoidable environmental impacts. In denying the earlier proposal, the City declined to adopt a statement of overriding considerations after finding that the benefits of that larger proposed expansion project did not outweigh its significant and unavoidable environmental impacts.

The EIR's urban decay analysis

In 2015, Walmart returned with a proposal for the current Project. To comply with CEQA, the City prepared and released for public comment a draft EIR, analyzing an expansion area of 66,500 square feet, approximately three percent larger than the actual proposal.

The EIR includes, among other things, a robust 43-page urban decay analysis, which is supported by a 123-page study prepared by ALH Urban & Regional Economics (ALH). The purpose of the study is to assess the economic impact of the Project and examine whether there is sufficient market demand to support the Project without affecting existing retailers so severely as to cause or contribute to urban decay. The study defines "urban decay" to mean, "among other characteristics, visible symptoms of physical deterioration ... that is caused by a downward spiral of business closures and long term vacancies .... [and] ... so prevalent, substantial, and lasting for a significant period of time that it impairs the proper utilization of the properties and structures, and the health, safety, and welfare of the surrounding community."² (Fn. omitted.)

The study estimates the potential economic impacts of the Project on retailers in the Project's market area, primarily in the form of diverted sales. The study then evaluates the extent to which the Project may cause or contribute to urban decay through a downward spiral of store closures attributable to the diverted retail sales.

To complete the study, ALH engaged in an extensive scope of work. Among other things, it (1) identified the Project's market area; (2) estimated the Project's net retail sales; (3) analyzed existing market conditions; (4) analyzed existing retail demand; (5) estimated the additional retail demand from forecasted population growth; (6) evaluated the Project's competitive effects on existing retailers; (7) identified other planned retail projects; and (8) assessed the extent to which the Project and other projects might contribute to urban decay.

The results of the study indicate that, net of new growth, the Project would have a negligible impact on sales of competing retailers ranging from 0.8 to 3.1 percent, which is within the range of normal market fluctuations and is not believed to be sufficient to cause existing stores to close.³ Thus, the EIR concludes that the Project alone would not cause the type of severe economic effects that could potentially lead to urban decay.

With respect to the Project's cumulative impacts, the study shows that the Project, combined with other planned retail projects in the market area, could induce the closure of one existing, full-service grocery store. However, given the size of the retail base, the study concludes the cumulative impacts would only increase the City's market vacancy rate by about one percent, from 4.4 to 5.4 percent, which is "well within the range of a robust, healthy commercial retail sector." The EIR also explains that the Chico market area has a strong history of "backfilling" retail space vacancies within a reasonable time, precluding prolonged vacancies that could lead to urban decay. Further, even if some sites were to experience prolonged vacancies, the EIR concludes that the vacancies would not devolve into deterioration or decay because Chico has a strong retail market, existing retail vacancies are well-maintained, and the City has effective regulations to prevent urban decay and blight. Thus, the EIR concludes that while economic impacts are likely, the Project's potential cumulative economic impacts likely would not be sufficient to cause urban decay.

The final EIR and approval of the Project

In September 2016, the City released its final EIR. It contained revisions to the draft EIR and written responses to comments received on the draft EIR, including comments relating to potential store closures and the City's alleged failure to address the "defects of the past project" rejected in 2009. The final EIR identifies mitigation measures to reduce the Project's potentially significant environmental impacts, but concludes that even with mitigation, the Project will have a significant and unavoidable impact on transportation because it will cause a segment of State Route 99 to operate at an unacceptable level of service during peak hour conditions.

In October 2016, the City's planning commission held a public hearing and, consistent with the staff recommendation, voted to certify the EIR and approve the Project with a statement of overriding considerations. CARE appealed the decision to the city council.

On November 15, 2016, the city council held a public hearing to consider CARE's appeal. At the hearing, CARE challenged the EIR's urban decay analysis and the proposed statement of overriding considerations, supporting its last-minute arguments with a report prepared by its "retail expert," Area Research Associates (ARA). Although no response was required, counsel for Walmart and City staff briefly responded to CARE's comments.

At the conclusion of the hearing, the city council voted to deny the appeal, certify the EIR, and approve the Project. The city council also adopted a statement of overriding considerations for the significant and unavoidable transportation impact to State Route 99. In doing so, the City found that the Project would provide 10 significant benefits, each of which constitutes a separate and independent ground to support a finding that the benefits of the Project outweigh the Project's single significant and unavoidable environmental impact.

The trial court's decision

In December 2016, CARE filed a petition for writ of mandate challenging the adequacy of the Project's EIR and the City's statement of overriding considerations. Walmart and the City opposed the petition. Following briefing, the trial court heard argument and then issued a detailed statement of decision rejecting each of CARE's arguments. In February 2018, the court entered judgment for the City and Walmart. This appeal followed.

DISCUSSION

Alleged CEQA violations

A. Standard of review

In a mandate proceeding to review an agency's decision for compliance with CEQA, the court reviews the administrative record to determine whether the agency abused its...