Supreme Court Rejects Limitation on State Agency Funding of Off-Site Mitigation

The California Supreme Court has rejected an argument that, absent a specifically earmarked legislative appropriation, the California State University (CSU) was legally precluded from contributing its fair share of funds to mitigate the “off-site” traffic impacts of a project to expand enrollment at the campus of San Diego State University (SDSU).  In City of San Diego, et al., v. Board of Trustees of California State University (August 3, 2015), the Court held that CSU’s erroneous stance was based on a misreading of an earlier Supreme Court decision, City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341 (Marina).  The Court decided that CSU’s proposed rule would substantially impair the fundamental statutory directive of the California Environmental Quality Act (CEQA) that “[e]ach public agency shall mitigate or avoid the significant effects on the environment of projects that it carries out or approves whenever it is feasible to do so.”

In Marina, the Court had decided that CEQA required CSU to mitigate the significant traffic, water supply, wastewater and other impacts of an earlier project to expand its CSU Monterey Bay campus, provided it were feasible to do so, regardless of whether those impacts would occur within the campus boundaries.  In that case, the Court dismissed as “beside the point” arguments that CSU “lack[ed] the power to construct infrastructure improvements away from campus on land [CSU] did not own and control”; the Court observed that CEQA permits an agency to pay third parties to perform necessary acts of mitigation on lands it does not control.  In dictum, however, the Court in Marina noted that sometimes a public agency will be unable to “purchase” such off-site mitigation: “Moreover, a state agency’s power to mitigate its project’s effects through voluntary mitigation payments is ultimately subject to legislative control; if the Legislature does not appropriate the money, the power does not exist.” (Marina, supra, 30 Cal.App.4th at 367.)

In 2007, CSU prepared an Environmental Impact Report (EIR) for a campus master plan revision for SDSU that would add more than 600,000 square feet of building space and increase enrollment by more than 10,000 students.  The EIR determined that traffic associated with the project would significantly affect numerous off-campus intersections and street and freeway segments.  The EIR identified the specific roadway improvements to reduce or avoid those impacts, and also calculated CSU’s “fair share” contribution of funding for the necessary improvements.

However, CSU did not pledge to pay its calculated fair share.  Instead, in reliance on Marina, the CSU Board of Trustees found that “the university’s fair-share funding commitment is necessarily conditioned up[on] requesting and obtaining funds from the California Legislature.  If the Legislature does not provide the funding, or if funding is significantly delayed, all identified significant impacts would remain significant and unavoidable.”  Then, finding that “there are no feasible mitigation measures that would reduce the identified significant impacts to a level of less than significant,” the CSU Board approved the SDSU expansion project, based on a “statement of overriding considerations” – i.e., a finding, allowed under CEQA, that the virtues of a project support its approval notwithstanding its significant and unavoidable environmental impacts.  For several consecutive years, CSU requested the Legislature to appropriate money for mitigation of the project’s off-site impacts, but no such appropriations have materialized.

In deciding the instant lawsuit, brought by the City of San Diego and other local agencies, the Supreme Court held that CSU’s reliance on Marina was misplaced.  The Court held that the dictum in Marina was “simply an overstatement,” and that CEQA permits a public agency to mitigate the effects of its projects using any and all of its discretionary powers – not just the power to spend legislative appropriations.  The Court noted that CSU itself had committed discretionary funding to mitigate the on-campus impacts of the SDSU expansion project without waiting on a specific legislative appropriation for that purpose, and held that under Marina, such a distinction between on- and off-site mitigation was “legally unsupportable.”  The Court also held that CSU’s interpretation of CEQA would unreasonably require that all state agencies (not just CSU) must seek special legislative appropriations for off-site mitigation, “forcing the Legislature to sit as a standing environmental review board” in a manner not provided under CEQA.

The Court stated that it was unaware of any other state agency that interpreted Marina in the same way as CSU.  However, the Court pointedly observed that CSU had relied on its mistaken interpretation of Marina in several other instances – including in a “similar case” pending before the Supreme Court: City of Hayward v. Trustees of the California State University.  The Court’s latest ruling and comments substantially narrow the ability of state agencies to avoid paying mitigation costs for off-site impacts.