e-Bulletin: Court Holds Public Agencies Can Impose CEQA Mitigation Fees On School Projects

written by Peggy Strand
Jennifer Buckman
Tyree Dorward

Recently, two court decisions have considered the extent to which the California Environmental Quality Act ("CEQA") requires colleges to mitigate their off-campus traffic impacts. (City of Marina v. Board of Trustees of the California State University, 2006 WL 2099943 (2006); County of San Diego v. Grossmont-Cuyamaca Community College Dist., 141 Cal. App. 4th 86 (2006).) This issue has been subject to intense debate for many years due to the San Marcos decision and the Legislature's subsequent adoption of the San Marcos Legislation, Government Code sections 54999 – 54999.6. These new court decisions interpret CEQA and the San Marcos Legislation in a manner that has far-reaching implications for both schools and local agencies because the cases indicate that the legislation should not be relied on to limit schools' obligations under CEQA to mitigate for impacts caused by school projects. Our analyses of these important new decisions, and our interpretation of their potential impacts, are set forth below.

City of Marina v. Board of Trustees of the California State University

The Supreme Court of California's decision last week in City of Marina, provides a reminder to public agencies that they should avoid drawing lines in the sand in their dealings with other public agencies, particularly in their evaluation of environmental impacts pursuant to the California Environmental Quality Act (CEQA). This decision is of significant importance to both educational agencies and general purpose public agencies because it addresses the ability of local agencies to impose capital facilities fees for off-site infrastructure improvements on educational agencies pursuant to Government Code section 54999 et seq. (popularly known as the "San Marcos Legislation") which partially codified the decision in San Marcos Water District v. San Marcos Unified School District, 42 Cal. 3d 154 (1986).

In City of Marina, the California State University Board of Trustees certified an Environmental Impact Report (EIR) for the Master Plan for its Monterey Bay campus on the old army base at Fort Ord (the "Project"). After the base closed in the early 1990s, the Legislature created the Fort Ord Reuse Authority (FORA) to finance and construct the new public facilities and uses for the base. The FORA members included the County of Monterey and several local municipalities, including the City of Marina. The FORA adopted a development plan that included improvements for traffic, fire protection, water and sewage. These improvements were to be financed through pro rata or "fair share" funding based on facilities fees imposed on future base developments and their corresponding impacts on infrastructure. The development plan included the Project and anticipated contribution of appropriate facilities fees from the Trustees for the Project.

When the Trustees prepared and certified the EIR for the Project, they identified significant off-site impacts to traffic, water, sewer, and fire safety which required infrastructure improvements. However, the EIR found that the "fair share" fees requested by FORA to mitigate the impacts to traffic and fire protection were infeasible because: (1) such off-site improvements could only be completed by FOR A, and (2) the Trustees were not legally permitted to fund such improvements. The EIR anticipated the Trustees would only pay fees pursuant to the San Marcos Legislation for impacts to infrastructure improvements specifically defined as "public utilities," including flood control, drainage, sanitation, and wastewater collection, treatment and disposal. The City challenged the determinations in the EIR and sought to require the Trustees to pay fees in the amount of their "fair share" of the cost of constructing the traffic and fire protection improvements. The City also sought to have the Trustees provide additional monies for needed water and sewage improvements.

Last week, the Supreme Court vacated the EIR and overturned the Trustees' finding that payment of the "fair share" fees was not a feasible mitigation measure. The Supreme Court stated that the Trustees could have voluntarily contributed to the FORA "fair share" fees and that such contributions could be consistent with the San Marcos Legislation as well as other limitations on the Trustees' expenditures of public funds. According to the Court, the Trustees erred in assuming that no lawful mechanism existed for implementing the "fair share" fees as mitigation measures. Apparently, the Trustees simply chose not to consider any additional payment of "fair share" fees as mitigation measures even though this mitigation was requested by FORA and its member agencies. Rather, the Trustees simply drew a "line in the sand," indicating that they would not contribute these funds to mitigating the offsite impacts of their Project.

The City of Marina decision will require the Trustees, and other educational agencies, to rethink how they address the potential off-site impacts their projects may have. However, the decision is far from a blank check allowing local agencies like cities, counties, and water districts to impose whatever mitigation fees they deem fit on the projects of other public agencies within their jurisdictions. In fact, City of Marina does not overturn or otherwise expand a local agency's right to obtain fees or other mitigation funding from another public agency beyond that authorized by the San Marcos case and the San Marcos Legislation, nor does it create a hammer through which local agencies can seek to obtain disproportionate funding of public infrastructure improvements from educational agencies. Rather, the City of Marina case simply holds that a mitigation measure requiring funding of off-site infrastructure improvements cannot be rejected as infeasible simply because the public agency undertaking the project and the environmental review is not the same agency that will be responsible for completing the off-site improvements.

County of San Diego v. Grossmont-Cuyamaca Community College District

In this case, the Grossmont-Cuyamaca Community College District adopted a Master Plan for its Cuyamaca College campus which identified 20 construction and modernization projects that were needed to accommodate anticipated growth at the school. The Master Plan anticipated that enrollment would nearly double from the current level of approximately 8,000 students to about 15,000 students; the District prepared an EIR that analyzed the environmental impacts associated with the adoption of the Master Plan. The Draft EIR indicated that a number of off-campus intersections and roadways would be affected by the Master Plan and that implementation of the Plan would result in significant impacts to transportation unless mitigation were imposed. However, the District's CEQA findings in support of the Master Plan approval found that it was legally infeasible for the District to mitigate for off-campus traffic impacts because: (1) Education Code section 14020.1 requires that money transferred to the District from the State School Fund be expended "solely for the purposes of instructional improvement and accountability," (2) Education Code section 81606 only authorizes a community college district to make improvements to streets that front its campuses, and (3) the District cannot be required to pay road improvement fees to the County because these fees are functionally equivalent to the "special assessments" that are prohibited by the San Marcos case and the San Marcos legislation. The District also claimed the mitigation fees were economically infeasible because they would require eminent domain and displacement of residents.

The Court rejected each of these arguments. First, the Court found that Education Code section 14020.1 did not relieve the District of its obligation to mitigate the environmental impacts of its projects. The Court found it relevant that Education Code section 14020.1 restricts "only a portion of the state funds provided to the district," and state regulations interpreting the Community College Construction Act explicitly require compliance with the "requirements of [CEQA]." Since non-restricted funds are available for expenditure by the District, and the state regulations contemplate that the District will comply with CEQA, the Court found that Education Code section 14020.1 did not limit the District's legal authority to mitigate for the off-site impacts of its projects.

Next, the Court considered the District's argument that Education Code section 81606 prohibits it from making improvements to streets that do not front the campus boundaries. Education Code section 81606 provides, in pertinent part:

The governing board of any community college district may grade, pave, construct sewers, or otherwise improve streets and other public places in front of real property owned or controlled by it, and also may construct immediate proximity to any school or site owned or controlled by the district, pedestrian tunnels, overpasses, footbridges, sewers and water pipes when required for school or administrative purposes . . . .

The Court interpreted this language to be permissive rather than restrictive and found that this provision of the Education Code does not overrule CEQA's substantive mandate to adopt all feasible mitigation measures to lessen or avoid a project's significant environmental impacts.

The Court then considered whether the San Marcos case or the subsequent San Marcos legislation excused the District from paying CEQA mitigation fees to the County. In San Marcos, the California Supreme Court held that a school district could not be required to pay a sewer capacity fee imposed by a water district because the fee constituted "a special assessment which has not been authorized by the Legislature." The San Marcos decision reasoned that public entities were exempt from special assessments because transferring funds from one tax-supported entity to another created unnecessary administrative costs and had the effect of wasting tax revenues. In response to the San Marcos decision, the Legislature passed a new act, Government Code sections 54999, et seq. (popularly known as the San Marcos Legislation), which partially abrogated the results of the case. The San Marcos Legislation authorizes public utilities to impose a "capital facilities fee" on public entities, subject to certain restrictions. Government Code section 54999.1(d) lists the fees that are authorized.

The District argued that Government Code section 54999.1 does not authorize traffic impact fees and, therefore, these fees could not be imposed on the District. The Court rejected this argument on the grounds that neither San Marcos nor the San Marcos Legislation arose in the context of CEQA mitigation fees.

Finally, the Court rejected the District's finding that the traffic mitigation fees were economically infeasible. Because the administrative record contained no estimate of the amount of fees for which the District would be liable and no evidence of the associated costs, the Court overruled the District's finding of economic infeasibility.

Potential Impacts of These Decisions

Based on these decisions, our advice to both general purpose public agency clients and to educational agencies is to continue to work cooperatively and collaboratively to address the issues associated with the financing of off-site public infrastructure. In light of the City of Marina and County of San Diego cases, we believe these issues should be raised and addressed as early as possible in the planning process. Further, it is advisable to resolve all financing issues informally prior to adoption or approval of the CEQA review of the public project so they can be addressed in the CEQA document. By approaching these financial responsibility issues in a cooperative manner, we believe public agencies may be able to avoid the creation of expensive disputes, such as occurred in these two cases.

For more details on these decisions or their implications on your project, contact an attorney with BB&K's Environmental Law & Natural Resources, School Law, Municipal or Special Districts Practice Groups.

Disclaimer: BB&K eBulletins are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué. ©2006 Best Best & Krieger LLP