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On January 30, 2018, the Fifth Appellate District certified for publication its earlier opinion in Visalia Retail, LP v. City of Visalia, upholding the City of Visalia’s (“City”) 2014 General Plan Update.  Plaintiff and Appellant, Visalia Retail, LP (“Plaintiff”), challenged the City’s General Plan land use policy LU-P-67, which set a 40,000-square-foot size limitation in the Neighborhood Commercial zones for grocery stores and similar businesses acting as the “anchor tenant” within a shopping center.  Plaintiff challenged LU-P-67 on two grounds, one under CEQA and one under California Planning and Zoning Law.  The Court of Appeal rejected both arguments.

General Plan Policy LU-P-67

The City’s General Plan Update included new standards for shopping centers located in Neighborhood Commercial zones, including the requirement that the center be “[a]nchored by a grocery store or similar business offering fresh product, poultry, fish, and meat.”  During the public review process, residents pushed for including a size limit of 35,000 square feet.  During a subsequent City Council work session, the Councilmembers recommended a maximum of 40,000 square feet for anchor tenants.  Ultimately, the City Council adopted the 40,000 square-foot limit:

Shopping centers in Neighborhood Commercial areas shall have the following characteristics:

  • Anchored by a grocery store or similar business offering fresh produce, poultry, fish and meat;
  • Include smaller in-line stores of less than 10,000 square feet;
  • Total size of 5 to 12 acres as shown on the Land Use Diagram; and
  • Integrated with surrounding neighborhood uses in terms of design, with negative impacts minimized.
  • Located no closer than one mile from other General Plan-designated
  • Neighborhood Commercial or Community Commercial locations, or from existing grocery stores.
  • No individual tenant shall be larger than 40,000 square feet in size.

During the administrative process before the City, Plaintiff submitted a report written by an experienced local commercial real estate agent with significant experience in leasing and development of shopping centers and involvement with dozens of grocery store transactions (“Report”).  The Report opined that the 40,000 square-foot cap “creates the strong likelihood that [neighborhood commercial] centers will never develop in Visalia,” and the author stated he was “unaware of any grocers willing to build new stores under 40,000 sq. ft. in size.”  The report cited typical square footage demands of more major grocery chains as 50,000 square feet or more, and cited examples of smaller neighborhood supermarket anchors closing down.  The Report also opined that physical effects could result from urban decay, noting that where there is an absence of the supermarket anchor in the shopping center, “the center may be subject to physical deterioration, urban decay, and blight.”

CEQA Claim

“CEQA does not define urban decay” but some have defined it as “visible symptoms of physical deterioration that invite vandalism, loitering, and graffiti that is caused by a downward spiral of business closures and multiple long term vacancies.”  (Joshua Tree Downtown Business Alliance v. County of San Bernardino (“Joshua Tree”) (2016) 1 Cal.App.5th 677, 685 [court upheld county negative declaration against claim that project had potential to cause urban decay].)  Plaintiff argued the City’s EIR for the General Plan Update was fatally flawed because it did not specifically evaluate the potential for the land use policy to cause urban decay.  The City argued that the Plaintiff’s Report did not offer legally sufficient evidence that the new size limit in LU-P-67 would cause anchor tenants to refuse to locate in neighborhood commercial centers.

The Court concluded that the Report’s analysis of causation was speculative, and the potential economic consequences it identified did not directly translate to urban decay impacts.  Quoting the 2016 opinion in Joshua Tree, the Court stated that “even if a handful of properties were to remain permanently vacant, the result would not necessarily be the kind of change to the physical environment that implicates CEQA.”  (Joshua Tree, 1 Cal.App.5th at 691.)  Here, inferring that urban decay would result from the incompatibility between LU-P-67, and the business model of the four grocers identified in the Plaintiff’s Report would be speculation.

In coming to this result, however the Court of Appeal recited the fair argument standard of review, which applies to negative declarations and not EIRs.  (Citing Laurel Heights Improvement Assn. v. Regents of University of California (1993) 6 Cal.4th 1112, 1123 [portion of opinion cited was describing review of negative declarations]; Joshua Tree, 1 Cal.App.5th 677 [case involved challenge to negative declaration].)

Moreover, despite Plaintiff’s urging, the Court refused to follow the decision in Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1184, where the Fifth District Court of Appeal applied the less deferential de novo standard of review to an EIR’s analysis of urban decay impacts.  In City of Bakersfield, the Court characterized the issue as a failure “to comply with the information disclosure provisions of CEQA” by omitting “any meaningful consideration of the question whether the shopping centers could, individually or cumulatively, trigger a series of events that ultimately cause urban decay.”  (Id. at 1208; see also Banning Ranch Conservancy v. City of Newport Beach (2017) 2 Cal.5th 918, 935 [where an EIR omits “essential information,” the omission is treated as a “procedural question subject to de novo review.”].)

The Court did seem to follow the legal standards in other recent cases treating statements presented about urban decay as speculative and not the sort evidence of physical impacts requiring CEQA review.   

General Plan Inconsistency Claim

Plaintiff argued that LU-P-67 conflicts with at least eight goals and policies in the General Plan related to general concepts around maintaining the City’s role as  a regional commercial and industrial center, enhancing the City’s retail base, striving for a balanced mix of local, regional, and national retailers, attracting new retail projects, and supporting infill development.  Plaintiff argued that LU-P-67 conflicted with these goals and policies because it will prohibit development on properties located in neighborhood commercial zones, some of which are surrounded by urbanized development.  Plaintiff relied on the Report as evidence of the rigidity of LU-P-67’s square footage restriction.

General plans “must be internally consistent.” (Orange Citizens for Parks & Recreation v. Superior Court (2016) 2 Cal.5th 141, 153.)  Similarly, amendments to the general plan must be internally consistent and cannot cause the general plan to become internally inconsistent.  (DeVita v. County of Napa (1995) 9 Cal.4th 763, 796, fn. 12.)  However, a general plan may not be invalidated “based on violation of the internal consistency and correlation requirements unless, based on the evidence before the city council, a reasonable person could not conclude that the plan is internally consistent or correlative.”  (South Orange County Wastewater Authority v. City of Dana Point (2011) 196 Cal.App.4th 1604, 1619, internal quotations omitted.)

The Court swiftly rejected Plaintiff’s argument that LU-P-67 was inconsistent with other provisions of the General Plan, finding that the General Plan seeks to encourage different types of development including the type advanced under LU-P-67, and that the City could have reasonably concluded that the tenant size cap would not impede infill development.  The Court’s decision reflects the high level of deference afforded to local government policy decisions in amending general plans.