Ely v. Velde, 73-1889.

• Decision Date: 08 January 1974
• Docket Number: No. 73-1889.,73-1889.
• Parties: Hiram B. ELY, et al., Appellants,v.Richard W. VELDE, etc., et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

497 F.2d 252

6 ERC 1558, 4 Envtl. L. Rep. 20, 369

Hiram B. ELY, et al., Appellants, v.Richard W. VELDE, etc., et al., Appellees.

No. 73-1889.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 8, 1974.Decided May 8, 1974.

Emanuel Emroch, Richmond, Va. (J. Durwood Felton, III, Richmond, Va., Stewart T. Graham, Jr., Charlottesville, Va., and Emanuel Emroch & Associates, Richmond, Va., on brief), for appellants.

Vann H. Lefcoe, Asst. Atty. Gen. (Andrew P. Miller, Atty. Gen. of Virginia, on brief), for appellees.

Before WINTER, BUTZNER and RUSSELL, Circuit Judges.

BUTZNER, Circuit Judge:

Residents of the Green Springs section of Louisa County, Virginia, appeal from a denial of their application for an injunction to restrain the construction of a penal reception and medical center in their neighborhood until the requirements of the National Environmental Policy Act (NEPA) and the National Historic Preservation Act (NHPA) have been met.¹ The district court--ruling that the state had permissibly transferred federal funds from the penal center to other state projects, and finding no significant federal contact with the center--dismissed the complaint. While we conclude that the facts do not establish that the center has become an irrevocably federal project, we nevertheless hold that if it is to be constructed without compliance with federal environmental Acts, the state must reimburse the federal government for sums initially allocated to the center, but subsequently diverted to other state projects. We therefore reverse the judgment of dismissal, reinstate the complaint, and remand the case for further proceedings.

* The factual background pertinent to this appeal is largely undisputed. In Ely I² we ruled that the proposed federal contribution to the center's fincancing was subject to NHPA and that it constituted a major federal action within the meaning of NEPA. We also concluded that the unfettered nature of block grants apportioned to the states by the Law Enforcement Assistance Administration (LEAA) under the Omnibus Crime Control and Safe Streets Act did not exempt federal participation from the requirements of either NEPA or NHPA.³ Consequently, we held that LEAA could not approve a grant of federal money for construction of the center until it complied with both environmental Acts.

At that time, the state had not expended any federal funds on the center or drawn on the LEAA grant. Recognizing that nothing had been done to irretrievably characterize the center itself as a federal project, we declined in Ely I to enjoin the state defendants from proceeding with construction.⁴ Thus at the end of 1971, the state was free to relinquish its unexpended grant and begin construction on its own.

The state, however, did not undertake the project independently. It elected to realy in part on federal financing. Early in 1972, the state legislature reappropriated unspent funds and appropriated new funds for constructing and equipping the center. The Appropriations Act reflected that the state expected to use 'special revenues received from the Federal government' aggregating apporximately $1,000, 000 in addition to state funds.⁵ The source of the federal revenue was the LEAA grant which federal officials had approved after the state had submitted comprehensive plans that included construction of the center at Green Springs.⁶

In the meantime state penal officials cooperated with the LEAA to draft an environmental impact statement that would meet the requirements of NEPA. In July 1972, LEAA completed the statement and released it for circulation. Reaction of both federal and state agencies was adverse.⁷ Faced with the delay that the unfavorable reception of the environmental impact statement foretold, the state penal officials decided to request withdrawal of the federal grant. They believed that by using only state funds they could let bids at a moment's notice unencumbered by the necessity of awaiting the satisfactory completion of the Acts' requirements. At the same time, they were determined to retain the federal funds and reallocate them to other projects.⁸ In due course, the state notified the LEAA of its change in plans, and without objection by that agency, the federal funds originally approved for the center were reallocated to other programs in the penal system, including substantial expenditures for a jail in Norfolk, Virginia.

II

A Fifth Circuit case appears to be the only reported instance of attempted avoidance of NEPA by the transfer of federal funds.⁹ There the state, unable to comply with NEPA throughout the length of a highway in San Antonio, Texas, proposed to construct end segments with state and federal funds and the middle segment with state funds. Under the state plan, in which federal authorities acquiesced, the federal funds for the middle segment would be used for other highway construction. Rejecting the state's proposal, the court pointed out that acceptance would 'be giving approval to the circumvention of an Act of Congress.' The court continued, 'the supremacy of federal law has been recognized as a fundamental principle of our Government since the birth of the Republic. United States Constitution, Art. VI, cl. 2. The State may not subvert that principle by a mere change in bookkeeping or by shifting funds from one project to another.'¹⁰

While the facts in San Antonio differ from those in the case before us, the principles in expressed furnish sound precedent for our decision. Here, too, Acts of Congress will be suberted if the state builds the center in disregard of NEPA and NHPA while retaining the federal funds initially allocated for its construction. NEPA and NHPA cut across nearly all federal construction financing. They were designed to assure to the fullest extent possible that the expenditure to federal funds would not despoil the environment or adversely affect property which has been officially designated as historically or architecturally significant.¹¹ A state's avoidance of NEPA and NHPA, while retaining funds that were granted with the understanding that they would foster the Acts' objectives, frustrates Congressional intent to preserve the quality of the nations, environmental and cultural heritage.

We are not persuaded by the state's arguments that a lack of federal contacts or the peculiar nature of LEAA block grants frees the state to reallocate the center's federal funds to other projects. Our earlier decision, Ely I, established that projects funded in part by block grants were subject to the requirement of NEPA and NHPA. That case also confirmed that federal contacts were sufficient to make LEAA's participation in financing the center a major federal project. We find no occasion for relitigating these issues.

Nor do we agree that the transfer of funds to new projects, as distinguished from existing projects, purges the state's bookkeeping transaction. The selection of new projects for the center's federal funds may make it impossible, as the state asserts, to prove that the federal funds released state funds for the center. But this argument misses the mark. The significant point is that the state is retaining federal funds that it obtained for the center on the premise that it would comply with federal environmental Acts, while at the same time it is planning to construct the center without compliance. It may well be that even if the state had never applied for funds for the center, its overall block grant would not have been diminished, because such grants are apportioned on the basis of population and the state could have proposed projects of a lower priority than the center to secure approval of equivalent funds. But this we believe is irrelevant. A block grant is not the same as unencumbered revenue sharing, for the grant comes with strings attached. The state voluntarily requested federal participation in the center and in this manner obtained construction funds conditioned upon compliance with NEPA and NHPA. The federal grant thus served national policy in two respects: it contributed to law enforcement in Virginia, and it encouraged preservation of environmental values at Green Springs. The state, we hold, is not entitled to use this money without fully observing both aspects of the national policy the grant was designed to promote. We conclude therefore that the district court erred in approving the state's decision to retain the funds, bypass NEPA and NHPA, and build the center.

III

The center's neighbors ask us to enjoin construction until the requirements of NEPA and NHPA are met. This is the remedy that was deemed appropriate by the San Antonio court, ¹² and the residents of the Green Springs section insist that it is the only remedy that will afford them the relief to...