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Habitat and Watershed Caretakers v. City of Santa Cruz et al

November 27, 2012


Trial Court: Santa Cruz County Superior Court Trial Judge: Honorable Timothy R. Volkmann (Santa Cruz County Super. Ct. No. CV168697)

The opinion of the court was delivered by: Mihara, J.


Appellant Habitat and Watershed Caretakers (Habitat) challenges the trial court's denial of its mandate petition. Habitat's petition contended that respondent City of Santa Cruz (the City) had failed to comply with the California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et seq.). The City had certified an environmental impact report (EIR) for a project to amend the City's sphere of influence (SOI) to include an undeveloped portion of the University of California, Santa Cruz (UCSC) campus known as "North Campus" so as to permit the City to provide extraterritorial water and sewer services to proposed new development in North Campus.

A sphere of influence is "a plan for the probable physical boundaries and service area of a local agency, as determined by the [local agency formation commission]." (Gov. Code, § 56076.) The Legislature has vested each county's local agency formation commission (LAFCO) with the power and duty to "approve with or without amendment, wholly, partially, or conditionally, or disapprove" a city's request for an SOI amendment. (Gov. Code, § 56428, subd. (e).) LAFCO's authority over a city's sphere of influence is guided by, among other factors, the capacity and adequacy of the services that the city has the ability to provide. (Gov. Code, § 56425, subd. (e)(3).) LAFCO also controls a city's authority to provide services outside its jurisdictional limits. (Gov. Code, § 56375, subd. (p).) "A city or district may provide new or extended services by contract or agreement outside its jurisdictional boundaries only if it first requests and receives written approval from [LAFCO]." (Gov. Code, § 56133, subd. (a).) LAFCO "shall approve, disapprove, or approve with conditions the contract for extended services." (Gov. Code, § 56133, subd. (d).) With certain exceptions not relevant here, a city may provide such services outside its jurisdictional boundaries only if the services will be provided "within its sphere of influence in anticipation of a later change of organization." (Gov. Code, § 56133, subd. (b).) The City's project therefore required LAFCO approval of both the City's application for the SOI amendment and a concurrent application by real party in interest the Regents of the University of California (the Regents) for approval of its agreement with the City for extraterritorial water and sewer services for North Campus.

Habitat asserts that the City's environmental review of the project violated CEQA. It argues that the EIR (1) did not adequately discuss and analyze the impacts of the project on water supply, watershed resources, biological resources, and indirect growth, (2) misdescribed the project's objectives, thereby skewing the discussion of alternatives and mitigations, (3) failed to consider and analyze a reasonable range of alternatives, and (4) failed to provide adequate mitigation measures. Habitat also maintains that the City failed to make sufficient findings and failed to provide an adequate statement of overriding considerations. We conclude that the City's EIR misdescribed the project's objectives, that this misdescription skewed its consideration of alternatives, and that the EIR was inadequate because it failed to consider any potentially feasible alternatives that would avoid or limit the significant environmental impact of the project on the City's water supply. Consequently, we reverse.

I. Background

The City has long suffered from a water supply deficit in dry years. It has considered and rejected many alternatives sources of water as infeasible, and its current long-term plan is to construct a desalination facility. The City's plans for a desalination facility are in their infancy.

In 2006, the Regents adopted the 2005 Long Range Development Plan (LRDP) for UCSC. The LRDP contemplated the development of North Campus. North Campus is not within the City's territorial boundaries or sphere of influence. North Campus is in an unincorporated area of the County of Santa Cruz (the County). A CEQA action brought by the City, the County, and other parties challenged the Regents' certification of an EIR for the LRDP and the Regents' adoption of the LRDP.

In August 2008, the City, the Regents, and the other parties to the litigation over the LRDP entered into a comprehensive settlement agreement (the CSA) resolving that action and other litigation concerning UCSC development. Under the CSA, the Regents made various commitments, including restrictions on enrollment and provisions for increasing on-campus housing. The housing commitment was contingent on the City seeking LAFCO approval of an SOI amendment and agreeing not to oppose the Regents' request for extraterritorial water and sewer services for North Campus.*fn1 The CSA provided that a LAFCO denial would excuse the Regents from the housing commitment.*fn2

The CSA was incorporated by stipulation into the superior court's September 2008 judgment in the action regarding the LRDP. In October 2008, the City sent a letter to LAFCO informing LAFCO that it had agreed to provide extraterritorial water and sewer services to North Campus. The City filed an application for an SOI amendment with LAFCO, and the Regents filed an application for the provision of extraterritorial water and sewer services. (See Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1321.) While these applications were pending, the City prepared a draft EIR for the project.

The draft EIR found one significant and unavoidable direct impact. "The proposed project would result in future provision of water service to the North Campus portion of the UCSC campus that would support new planned development and growth to the year 2020. There are inadequate water supplies to serve the project under existing and future multiple dry year (drought) conditions."*fn3 The draft EIR also found that there were other significant secondary impacts, including the impact on biological resources, but it concluded that these other impacts generally could be mitigated to insignificance. Some of the indirect impacts of UCSC growth were found to be unavoidable, but, other than erosion, those impacts are not at issue in this action. The draft EIR noted that "[i]mplementation of the proposed project [providing water and sewer services to North Campus] would enable UCSC to move forward with plans to develop the North Campus" under the LRDP. After receiving and responding to the comments on the draft EIR, the City certified in August 2010 that the final EIR complied with CEQA.

Habitat filed a petition challenging the City's certification of the final EIR. It alleged that the City had violated CEQA because it (1) did not adequately discuss the project's environmental impacts, (2) failed to identify and discuss a reasonable range of alternatives, and (3) failed to propose adequate mitigation measures. Habitat also contended that the City violated CEQA by making inadequate findings and approving an inadequate statement of overriding considerations. The trial court denied the petition. Habitat timely filed a notice of appeal.

II. Discussion

A. Standard of Review

"We may not set aside an agency's approval of an EIR on the ground that an opposite conclusion would have been equally or more reasonable. 'Our limited function is consistent with the principle that "[t]he purpose of CEQA is not to generate paper, but to compel government at all levels to make decisions with environmental consequences in mind. CEQA does not, indeed cannot, guarantee that these decisions will always be those which favor environmental considerations." ' [Citations.] We may not, in sum, substitute our judgment for that of the people and their local representatives. We can and must, however, scrupulously enforce all legislatively mandated CEQA requirements." (Citizens of Goleta Valley v. Board of Supervisors (1990) 52 Cal.3d 553, 564 (Goleta II).)

Judicial review of an agency's decision to certify an EIR and approve a project "shall extend only to whether there was a prejudicial abuse of discretion. Abuse of discretion is established if the agency has not proceeded in a manner required by law or if the determination or decision is not supported by substantial evidence." (Pub. Resources Code, § 21168.5; Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 392, fn. 5 (Laurel Heights).) "Noncompliance with substantive requirements of CEQA or noncompliance with information disclosure provisions 'which precludes relevant information from being presented to the public agency . . . may constitute prejudicial abuse of discretion within the meaning of Sections 21168 and 21168.5, regardless of whether a different outcome would have resulted if the public agency had complied with those provisions.' (§ 21005, subd. (a).) In other words, when an agency fails to proceed as required by CEQA, harmless error analysis is inapplicable. The failure to comply with the law subverts the purposes of CEQA if it omits material necessary to informed decisionmaking and informed public participation." (County of Amador v. El Dorado County Water Agency (1999) 76 Cal.App.4th 931, 946.)

B. Assessment of Impacts

Habitat contends that the final EIR did not adequately assess the environmental impact of the project on water supply, watershed resources, biological resources, and indirect growth.

1. Water Supply

a. Background

The draft EIR extensively described the City's water supply situation. The City currently has four "primary water sources." Three coastal streams and a natural spring on the North Coast provide almost a quarter of the City's water. Nearly half of the City's water comes from diversions from the San Lorenzo River, a source which the City shares with other water districts, private water companies, and individual property owners along the river. These diversions are restricted to protect fish habitat. Loch Lomond Reservoir, which collects water from the Newell Creek watershed, supplies close to a quarter of the City's water. The City must share this water with another water district, and the City's withdrawals are limited. A very small amount of the City's water supply comes from wells in Live Oak, which play an important role because they can be drawn upon when supplies of surface water are limited. However, these wells draw from a groundwater basin in which water levels are dropping and that is at risk of saltwater intrusion.

All of the City's existing water sources face threats in the future. The amount of water available to the City from the North Coast streams and spring, and from the San Lorenzo River, may be restricted in the future as a result of a Habitat Conservation Plan (HCP) currently being prepared. Legal issues potentially threaten the City's supply of water from Loch Lomond Reservoir. Production from the Live Oak wells is threatened by overpumping from the aquifer. Climate change may also threaten all of these water sources.

The City's water sources produce at most 4,400 mgy (million gallons per year). However, their production fluctuates, and it can be as low as 3,400 mgy. Annual net water demand, on the other hand, averages between 3,900 mgy and 4,000 mgy and is projected to steadily increase through 2020. While the City's forecasts vary, demand will likely exceed 4,350 mgy by either 2020 or 2030. If the City's water supply does not decrease, demand is expected to exceed supply in normal (non-drought) years sometime between 2015 and 2020 or possibly not until 2025.

"The City's water supply has limited capacity to serve additional users under normal conditions and has insufficient supplies to meet existing demand under drought conditions." In 2006, the City's water system was operating at 93 percent of capacity. "A significant shortage occurs on average about 1 out of every 10 years." During a two-year drought, the City's water supplies are woefully insufficient with its supplies estimated to be able to serve only half of demand.

Over the last 20 years, the City has considered and studied various options for increasing water supply and reducing demand. Many options have been examined and found to be infeasible or of very limited utility. In 2005 and 2006, the City adopted both an Urban Water Management Plan (UWMP) and an Integrated Water Plan (IWP). These plans settled on three strategies: (1) conservation; (2) curtailment (restrictions or rationing) in times of shortage; and (3) construction of a seawater desalination facility. The City is proceeding with plans for a desalination facility, but has not yet engaged in project-level environmental review for that proposed project, which would require numerous approvals and permits from other agencies. The City sees a desalination facility as its "only feasible alternative" and "only practical solution" for increasing its water supply. However, the City has "conclude[d] that it cannot 'confidently determine' that this source is 'reasonably likely,' as spelled out in the guidance provided by the California Supreme Court in its decision in Vineyard Area Citizens et al. v. City of Rancho Cordova (2007) 40 Cal.4th 412." A desalination facility is nonetheless "considered to be the most likely future water source, although it nonetheless remains somewhat uncertain until design, environmental review and regulatory approvals are completed." The proposed desalination facility would be shared with another water district. The environmental impacts of the construction of the proposed desalination facility were addressed in the City's program-level EIR for the IWP in 2006.

UCSC is currently the "largest water customer" in the City's service area. In 2007, UCSC used approximately 200 mgy, after using 205 mgy in 2005. If UCSC develops North Campus, its water demand is expected to increase to approximately 340 mgy by 2020. The City prepared a Water Supply Assessment (WSA) for the Regents' North Campus development project. The City concluded that development of North Campus would require only an additional 100 mgy by 2020, in part because it assumed that UCSC would reduce its overall usage by 15 percent through conservation measures. An additional 26 or 38 mgy would be used by UCSC in 2020 in other areas (not North Campus) for a total UCSC usage of 338 mgy in 2020.

Although the draft EIR acknowledged that the impact of the project on the City's water supply was a "potentially significant impact," it concluded that the City had adequate supply to serve the project in normal years and would fall short only in dry years. This assessment was based in part on the assumption that the City's water demand growth rate would be low (0.4 percent) rather than high (0.8 percent). The City would have a shortfall in 2025 of 42 mgy in normal years if the growth rate was 0.8 percent, which was what was projected. In dry years, the City would have a shortfall regardless of the growth rate and even without the project's increased water demand. The magnitude of such a shortfall (over 1,500 mgy) would dwarf the demand required by the project (100 mgy).

b. Analysis

Habitat's challenge to the adequacy of the City's analysis of water supply impacts is based on Santiago County Water Dist. v. County of Orange (1981) 118 Cal.App.3d 818 (Santiago) and Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova (2007) 40 Cal.4th 412 (Vineyard).

Santiago is readily distinguishable. In Santiago, a water district challenged an EIR for a mining operation in its district. (Santiago, supra, 118 Cal.App.3d at p. 822.) The Court of Appeal found that the EIR provided inadequate information about water supply in two respects. (Santiago, at p. 829.) It did not provide information about the facilities that would be needed to deliver water to the mining operation "or facts from which to evaluate the pros and cons of supplying the amount of water that the mine will need." (Ibid.) Instead of analyzing the impact that supplying water to the mining operation would create, the EIR simply stated, incorrectly, that the district had indicated its ability to supply the water. (Santiago, at pp. 830-831.) The EIR was also "silent about the effect of that delivery on water service elsewhere in the Water District's jurisdiction." (Santiago, at p. 831.) The Court of Appeal concluded that the EIR lacked "information about how adverse the adverse impact will be." (Ibid.)

Here, the draft EIR did not suffer from the infirmities identified by the Court of Appeal in Santiago. It carefully described the impact that supplying water to North Campus would have on the City's ability to meet the demands of its existing users. While the City's supply was already inadequate, the draft EIR explained that the impact of supplying an additional 100 mgy for the North Campus development would be just a small part of the overall impact on the City's existing users of the City's inadequate water supply. The City's water supply will fall short in drought years regardless of the project and will fall short in normal years in the near future also regardless of the project. The draft EIR acknowledged that supplying water to North Campus will contribute to the shortfall and provided estimates of the size of both North ...

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