County Application for Jail Expansion State Funding Not a “Project” Requiring CEQA Review

In 2011, after the state legislature approved realignment legislation and funds to shift low-level offenders from state prisons to county jails, Orange County (“County”) applied for state funding to expand its jail facility near the City of Irvine (“Irvine”).  Irvine sued, arguing that the County should have performed environmental review to comply with the California Environmental Quality Act (“CEQA”) before applying to the state for jail expansion funds.  The trial court denied Irvine’s petition.  On appeal, the Fourth District Court of Appeal affirmed the trial court decision, finding that the application was not a “project” subject to CEQA review because it did not commit the County to a definite course of action.  City of Irvine v County of Orange (October 28, 2013) — Cal.App.4th —- [13 Cal. Daily Op. Serv. 12,747].

In reviewing the case, the appellate court applied principles defined in the court cases Save Tara v. City of West Hollywood (2008) 45 Cal. 4th 116 and Cedar Fair, L.P. v. City of Santa Clara (2011) 194 Cal.App.4th 1150.  In Save Tara, the Supreme Court found that a development agreement between a city and a private developer constituted a project subject to CEQA review because the agreement committed the city to a definite course of action that foreclosed consideration of project alternatives or mitigation measures.  The agreement at issue in Save Tara had a declared purpose of developing the property, public pronouncements by the city indicated commitment to the project, and the city committed to loaning the developer $1 million, with no obligation to repay half of the loan if the city did not approve the project.  In the later case of Cedar Fair, an appellate court applied Save Tara principles to find that a city approval of a term sheet with a private developer did not constitute a CEQA project because the agreement merely articulated preliminary terms of the project, only committed the city to further negotiations with the developer, and allowed the city full discretion to approve or reject the project.

The appellate court noted that even though the Save Tara and Cedar Fair cases involved private projects, the underlying principles of those cases apply to public projects as well.  In applying the Save Tara and Cedar Fair principles, the appellate court emphasized that the critical question was not whether the public agency was entering into a binding agreement, but whether “the totality of the circumstances surrounding the public agency's action has effectively committed the agency to the project.”

Turning to the particular circumstances of Orange County’s application for state jail funding, the appellate court observed that state approval of the County’s application would lead only to a conditional award that allowed the County to move forward in the application process.  Additionally, after a conditional award was made, the state process required numerous additional steps to obtain funding: working with the state on a facility master plan, CEQA review, negotiations and contracting with the state on respective responsibilities and performance standards, making necessary local approvals, and obtaining state approval of construction plans.  Further, the County would not receive state funds in advance, but would only be reimbursed by the state for expenditures already made.

The appellate court explained that this process was different from the developer agreement in Save Tara because the County’s jail expansion funding application “committed the County to nothing” and preserved “city's power to modify or reject the project based on the impacts identified in the EIR.”  The state funding process designated the County as the lead agency responsible for CEQA compliance with any expansion, and so the application did not limit the County’s discretion to impose mitigation or project alternatives.  Instead, the County’s application was more like the term sheet agreement in Cedar Fair, because it merely allowed the County to continue the process of exploring the opportunity of obtaining state funds for jail expansion.

The appellate court rejected Irvine’s argument that the County was committed to action by state-required assurances including that the County would adhere to agreements with the state, appropriate financing for the project, and not dispose of or modify use of the property without state permission.  The court concluded that the assurances merely demonstrated that the County had the ability to follow state procedures if the application were approved.

The appellate court also pointed out that the County made the same assurances in an earlier, 2008 phase of funding, in which the County received and rejected a conditional award because it was dissatisfied with the award’s conditions.  The court found that this rejection demonstrated that the County was not committing itself with its current state application, which followed the same process as the earlier funding phase.

Finally, the appellate court rebuffed Irvine’s contention that the County committed itself to the expansion because it had already dedicated substantial resources to the plan.  The court explained that the County’s advocacy of the expansion was not sufficient to demonstrate a legal commitment that would effectively cut off environmental review.


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