SUPERIOR COURT OF CALIFORNIA COUNTY OF MONTEREY. Respondents. This matter came on for court trial on February 10, 2010.

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1 SUPERIOR COURT OF CALIFORNIA COUNTY OF MONTEREY THE FLANDERS FOUNDATION, Petitioner, CITY OF CARMEL-BY-THE-SEA and CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA, Case No. M99437 Intended Decision Respondents. This matter came on for court trial on February 10, All sides were represented through their respective attorneys. The matter was argued and taken under submission. This intended decision resolves factual and legal disputes, and shall suffice as a statement of decision as to all matters contained herein. Background Respondents, City of Carmel-by-the Sea and City Council of the City of Carmel-bythe-Sea (collectively referred to as Carmel or City), purchased the Flanders Mansion (Mansion) in The Mansion property is listed in the National Register of Historic Places, California Register of Historical Resources, Carmel Inventory, and the Carmel Register of Historic Resources. San Francisco architect Henry Gutterson designed the Mansion and its gardens. The Mansion parcel is located within the 35-acre Mission Trails Nature Reserve which includes the adjacent Lester Rowntree Native Plant Garden. In Flanders v. City of Carmel (M76728), the City proposed to sell the Mansion to (1) generate funds for capital improvements; (2) divest itself of property needing significant rehabilitation and at the same time preserve the Mansion as a historic 1

2 resource; (3) put the Mansion to productive use and protect the surrounding neighborhoods from various impacts; and (4) protect the surrounding park and Environmentally Sensitive Habitat Areas (ESHA). This Court granted Petitioner s, The Flanders Foundation (Flanders), writ, in part. Now, the City s primary objective is to divest itself of the Mansion because the Mansion needs significant rehabilitation and requires ongoing maintenance. The City proposes to sell the Mansion and secondarily require that: (1) it be preserved as a historic resource; (2) put to productive use; (3) the use not disrupt (a) the surrounding neighborhood and (b) the public s enjoyment of Mission Trails Nature Preserve and the Lester Rowntree Native Plant Garden; (4) the environmental resources of the park are protected; and (5) the proposed use will ensure that the Mansion property will provide the public with as many park benefits as are practical. Flanders requests that the Court find that the Revised Final Environmental Impact Report (RFEIR) is inadequate because (1) the Surplus Lands Act applies and the RFEIR did not analyze the potential significant environmental impacts if the parkland is sold or leased to another government agency (Gov. Code, , ); (2) the response to comments regarding the Surplus Land Act issue and mitigation by reducing the size of the parcel were conclusory; (3) the economic feasibility analysis should be included in the RFEIR; (4) the economic feasibility analysis was inadequate; (5) lease of the Mansion is feasible; and (6) the statement of overriding consideration is unsupported. The Court finds that the City did not comply with CEQA as a matter of law because the City failed to analyze the potential environmental impacts of selling or leasing the 2

3 Mansion in compliance with the Surplus Lands Act, and in responding to comments. In all other respects, the Court finds that the City complied with CEQA. Administrative Record The administrative record (AR) was admitted into evidence. The record from Flanders v. City of Carmel (M76728) is cited as AR [page], and the recent record is cited as 2AR [page]. Judicial Notice Petitioner s first and second requests for judicial notice were granted. Standard of Review The Court s review is limited to ascertaining whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law or the decision is not supported by substantial evidence. (Pub. Resources Code, 21168, ) This standard governs the review of Carmel s compliance with the California Environmental Quality Act (Pub. Resources Code, et seq.) (CEQA). 1 (Lucas Valley Homeowners Assn. v. County of Marin (1991) 233 Cal.App.3d 130, 142.) The CEQA Guidelines, California Code of Regulations, title 14, section et seq. [Guidelines], contain a definition of substantial evidence as used in these guidelines in connection with whether a project will have a significant effect on the environment. (Cal. Code Regs., tit. 14, 15384, italics added.) (a) Substantial evidence as used in these guidelines means enough relevant information and reasonable inferences from this information that a fair argument can be made to support a conclusion, even though other conclusions might also be reached. Whether a fair argument can be made 1 All subsequent statutory references are to the Public Resources Code except as otherwise indicated. 3

4 that the project may have a significant effect on the environment is to be determined by examining the whole record before the lead agency. Argument, speculation, unsubstantiated opinion or narrative, evidence which is clearly erroneous or inaccurate, or evidence of social or economic impacts which do not contribute to or are not caused by physical impacts on the environment does not constitute substantial evidence. [ ] (b) Substantial evidence shall include facts, reasonable assumptions predicated upon facts, and expert opinion supported by facts. (Guidelines, ). (Preservation Action Council v. City of San Jose (2006) 141 Cal.App.4th 1336, 1352, fn 9 (Preservation Action Council), emphasis in original, internal quotations omitted.) [Q]uestions of interpretation or application of the requirements of CEQA are matters of law. While [the court] may not substitute [the court s] judgment for that of the decision makers, [the court] must ensure strict compliance with the procedures and mandates of the statute. (Save Our Peninsula Committee v. Monterey County Bd. of Supervisors (2001) 87 Cal.App.4 th 99, 118, citations omitted.) Discussion (A). Surplus Lands Act issue This Court in Flanders v. City of Carmel (M76728) found that the Mansion was parkland, and the City was directed to comply with Government Code sections and , if the City chose to sell the Mansion. Flanders argues that the RFEIR does not provide an analysis of the environmental impacts that might result from another agency utilizing the Mansion property for low or moderate income housing or other purposes, and as a matter of law, the City did not comply with CEQA. 4

5 Flanders notes that when the issues were brought to the City s attention (2AR 871), the EIR consultant s response was that (1) any future use of the property would be restricted by the adopted conditions and mitigation measures that the City would impose on a private party; and (2) an analysis of an agency purchasing or leasing the Mansion would involve a high degree of conjecture and speculation. (2AR 878.) Revisions to the RFEIR regarding this issue included the addition of two paragraphs: [1] Whether any such agency will request to negotiate for purchase of the property or be able to purchase the property at fair market value, is unknown and speculative at this time. Likewise, whether any such agency will be able to comply with the mitigation measures, conditions of sale and covenants to be recorded to run with the land, and the use to which any such agency might put the property are also unknown and speculative at this time. [2] As stated in the EIR, should any future use be proposed which presents potentially-significant environmental impacts which have not been analyzed in this EIR, additional environmental review in accordance with CEQA would be required. This requirement would apply to the above-listed agencies [per Gov. Code, 54222] if any of them were to purchase the property and propose such a use. (2AR 929.) Government Code section provides: Any local agency disposing of surplus land shall send, prior to disposing of that property, a written offer to sell or lease the property as follows: [ ] (a) A written offer to sell or lease for the purpose of developing low- and moderate-income housing shall be sent to any local public entity, as defined in Section of the Health and Safety Code, within whose jurisdiction the 5

6 surplus land is located. Housing sponsors, as defined by Section of the Health and Safety Code, shall be sent, upon written request, a written offer to sell or lease surplus land for the purpose of developing low- and moderate-income housing. All notices shall be sent by first-class mail and shall include the location and a description of the property. With respect to any offer to purchase or lease pursuant to this subdivision, priority shall be given to development of the land to provide affordable housing for lower income elderly or disabled persons or households, and other lower income households. [ ] (b) A written offer to sell or lease for park and recreational purposes or open-space purposes shall be sent: (1) To any park or recreation department of any city within which the land may be situated. (2) To any park or recreation department of the county within which the land is situated. (3) To any regional park authority having jurisdiction within the area in which the land is situated. (4) To the State Resources Agency or any agency that may succeed to its powers. [ ] (c) A written offer to sell or lease land suitable for school facilities construction or use by a school district for open-space purposes shall be sent to any school district in whose jurisdiction the land is located. [ ] (d) A written offer to sell or lease for enterprise zone purposes any surplus property in an area designated as an enterprise zone pursuant to Section 7073 shall be sent to the nonprofit neighborhood enterprise association corporation in that zone. [ ] (e) A written offer to sell or lease for the purpose of developing property located within an infill opportunity zone designated pursuant to Section or within an area covered by a transit village plan adopted pursuant to the Transit Village Development Planning Act of 1994, (Article 8.5 (commencing with Section 65460) of Chapter 3 of Division 1 of Title 7) shall be sent to any county, city, city and county, community redevelopment agency, public 6

7 transportation agency, or housing authority within whose jurisdiction the surplus land is located. [ ] (f) The entity or association desiring to purchase or lease the surplus land for any of the purposes authorized by this section shall notify in writing the disposing agency of its intent to purchase or lease the land within 60 days after receipt of the agency's notification of intent to sell the land. Flanders contends that the Surplus Lands Act cannot set any conditions other than market price and timing of payment on an agency purchasing or leasing the Mansion (Gov. Code, 54225, 54226), and consequently, the City had to analyze potential environmental impacts as if the conditions and mitigation measures were not binding on another agency. (Pub. Resources Code, 21061, 21100; Guidelines, ) Flanders requests that the Court order that the EIR include such an analysis and that the EIR be recirculated so that the public and other agencies can comment. Carmel argues that res judicata precludes any review of the Surplus Lands Act issue because this Court disposed of the General Plan consistency issue by finding that there was no abuse of discretion in Carmel s determination of consistency between the General Plan and a sale of the Mansion Parcel. (Flanders v. City of Carmel, Intended Decision, pp ) The Court is puzzled by this argument because the Court agreed with Flanders and found that the Mansion was parkland and that the Surplus Land Act applied in Flanders v. City of Carmel. (Intended Decision, pp ) Also perplexing is that the City argues that Flanders had to raise and fully litigate the issue of an agency buying or leasing the Mansion in Flanders v. City of Carmel, and because Flanders failed to do so, claim preclusion applies to any attempt by Flanders to 7

8 relitigate the issue of selling the Mansion. (Federation for Hillside Canyon Ass ns v. City of Los Angeles (2004) 126 Cal.App.4 th 1180, 1202.) The previous EIR in Flanders v. City of Carmel did not address this issue, in part, because the City adamantly argued that the Mansion was not parkland, and consequently the City did not have to comply with the Surplus Lands Act, and res judicata or collateral estoppel do not apply to this case. If in the abstract, res judicata or collateral estoppel could be applied, the nexus of this case with Flanders v. City of Carmel supports a finding that barring the Surplus Lands Act issue would not be in the public interest. The fact that the City held hearings and took evidence, produced and circulated a RDEIR that incorporated the Court s ruling regarding compliance with the Surplus Lands Act and the sale of parkland, requires that this Court protect Flanders due process rights to argue this issue in support of CEQA s goal of protecting the environment. (Zeunik v. Superior Court (2008) 159 Cal.App.4 th 76, 84; Friends of Mammoth v. Board of Supervisors (1972) 8 Cal.3d 247, 259.) The City argues that the Court must apply the substantial evidence standard of review in assessing whether the RFEIR s analysis of potential environmental effects was adequate. (Laurel Heights Improvement Ass n of San Francisco, Inc. v. Regents of the Univ. of California (1988) 47 Cal.3d 376, ) The City contends that a sale of the Mansion to an agency without any conditions is not reasonably foreseeable, and the 2009 RFEIR did not have to analyze this issue. Alternatively, the City contends that the allowable uses in the P-2 zoning district sufficiently mirror the uses permitted by the Surplus Lands Act and that there is substantial evidence in the record to support an argument that an analysis of future uses 8

9 of the Mansion did take place. The City also argues that the use of the Mansion parcel will be constrained because of historic water usage. (2AR ) The fundamental purpose of an EIR is to provide public agencies and the public in general with detailed information about the effect which a proposed project is likely to have on the environment ( ) (Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova, supra, 40 Cal.4th 412, 428.) Thus, an EIR must adequately identify and analyze the significant environmental effects of the proposed project. ( 21100, subd. (b); Guidelines, , subd. (a).) In assessing the impact of a proposed project on the environment, the lead agency normally examines the changes in existing environmental conditions in the affected area that would occur if the proposed activity is implemented. (Guidelines, , subd. (a); see Wal-Mart Stores, Inc. v. City of Turlock (2006) 138 Cal.App.4th 273, 289 [41 Cal. Rptr. 3d 420].) Direct and indirect significant effects of the project on the environment shall be clearly identified and described, giving due consideration to both the short-term and long-term effects. (Guidelines, , subd. (a).) The degree of detailed analysis necessary in an EIR is summarized in the Guidelines as follows: An EIR should be prepared with a sufficient degree of analysis to provide decisionmakers with information which enables them to make a decision which intelligently takes account of environmental consequences. An evaluation of the environmental effects of a proposed project need not be exhaustive, but the sufficiency of an EIR is to be reviewed in the light of what is reasonably feasible. The courts have looked not for perfection but for adequacy, completeness, and a good faith effort at full disclosure. (Guidelines, ) (San Joaquin Raptor Rescue 9

10 Center v. County of Merced (2007) 146 Cal.App.4 th 645, 660, internal quotations omitted.) Revisions to the RDEIR in response to comments of the sale under the Surplus Lands Act provide in part: The 2009 RDEIR and the 2005 DEIR evaluated the potential environmental impacts associated with the use of the Flanders Mansion property as a commercial operation and more intensified uses. Specifically, uses under the existing P-2 Zoning District (Improved Parklands) were evaluated and considered per the allowable uses in the Zoning Ordinance. The Ordinance discusses allowed P-2 uses in Schedule II-C and the corresponding footnotes. There are four uses allowed without any footnotes or limitations (Park/Recreation Facilities, Live Performance Theater, Motion Picture Theater and Communication Antennae/Towers). In addition, several uses are listed that have limits established: (Single-Family Residential, Senior Citizen housing, Day Care, Clubs/Lodges, Small Conference Facilities and Government Officers). Based on Table in the RDEIR, traffic generation rates and corresponding impacts were assigned for park/recreational, residential (single-family detached) and public/quasi-public (general office). Estimates were based on the Institute of Transportation Engineers, Trip Generation, 7 th Edition, 2003 which provides assumptions for traffic volumes associated with various uses depending on the number of employees, type of use, and other factors. Additionally, Table 3 of the 2005 Draft EIR on Page 4.4 identified various uses of the property assumed under allowable zoning and provided an impact summary of traffic under these uses. 10

11 These included: Park and Recreation Use, residential uses, Municipal Facilities, Non-profit Uses, Lodge and Motel and Day Care. This RDEIR evaluated a range of potential future uses in accordance with the existing zoning designation (P-2 Improved Parkland). Potential uses identified of those agencies under the Surplus Land Act include parks and recreation, resources agencies or officers of school districts, housing sponsors such as those for senior citizen housing, or other uses which are similar in character or nature to the uses already specified and analyzed in the 2005 EIR and 2009 RDEIR. Additionally, mitigation was incorporated in the RDEIR that restricts future use of the property to those uses that have historically occupied the Flanders Mansion property since it was acquired by the City. Therefore, high traffic generating uses, such as commercial uses (e.g., a housing project, visitor serving facilities similar to a bed and breakfast or motel, or a school facility) would be prohibited from occupying the site through the conditions of sale or other legally binding method in order to avoid potential significant impacts due to land use conflicts with the Mission Trails nature Preserve, including the Lester Rowntree Arboretum, and the surrounding single-family residential neighborhoods. The project site is within the MPWMD [Monterey Peninsula Water Management District], which is responsible for issuing water connection permits for development within its boundaries. The MPWMD restricts the water allocation assigned for each jurisdiction and requires that all properties that modify or add water fixtures on a property within the MPWMD obtain District approval. The City has negligible amount of water to allocate to new uses in the area within the 11

12 MPWMD. Water will be restricted to using the amount of water historically allocated for the buildings and use on the site, in accordance with the regulations of the MPWMD. Since the historical amount of water the project site has used is consistent with use as a low intensity use for single-family home or limited office use, water is considered a severe constraint for development of a number of the uses identified under the Surplus Land Act. Based on the assumed uses outlines above, this alternative would result in greater level of impacts than the proposed project in regard to aesthetics, biological resources, cultural resources, land use and planning, parks and recreation, and transportation/traffic due to the potential intensity of use and would not avoid the significant unavoidable impacts associated with the proposed project. Depending on the type of agency or owner, this alternative could still result in the permanent loss of publicly owned parkland due to a change in ownership consistent with the proposed project. This alternative, would meet the primary project objective, divestment of the Flanders Mansion property. This alternative, if inconsistent with the historic uses associated with the Flanders Mansion, would not achieve objectives related to the minimization of traffic impacts on the surrounding residential neighborhoods. Additionally, depending on the type of use proposed, this Alternative may not be feasible due to the lack of available infrastructure (water) to serve the use. Further, the process for offering the land for public sale to any of these agencies and future use of the property under [the Surplus Land] Act does not preclude the requirements of state law or the provisions of CEQA. Future use of the site would 12

13 require City permits and processing under applicable City regulations and state statues. If any uses were proposed that [were] not within the parameters of the uses considered under this environmental document that would trigger further environmental review, CEQA guidelines would require that the City conduct the appropriate additional environmental assessment and documentation. (2AR , underscoring deleted.) "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 and , 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." (County of Amador v. El Dorado County Water Agency (1999) 76 Cal.App.4 th 931, 946.) In this instance, Carmel failed to proceed as required by law. The RFEIR did not fulfill its information disclosure function. The City did not consider nor analyze the potential environmental impacts that might occur if an agency purchased or leased the Mansion parcel and the potential environmental consequences if the agency would not be constrained by any conditions that the City seeks to attach to the Mansion parcel. Also, to the extent the City argues that there is substantial evidence to support such an analysis, the Court finds that the EIR is without substantial evidence in the record or reasoned analysis regarding the Surplus Lands Act issue. Rather, the matters raised in 13

14 the revisions to the RDEIR consist of a generalized discussion of P-2 zoning and the Surplus Lands Act without a sufficient nexus. There is also a lack of any analysis of what uses could be made of the Mansion by an agency, and precisely what amount of water is available for the Mansion. As to the City s argument that another EIR can be prepared at a later date if an agency purchases or leases the property and the conditions do not apply: Courts have considered separate activities as one CEQA project and required them to be reviewed together where, for example, the second activity is a reasonably foreseeable consequence of the first activity; the second activity is a future expansion of the first activity that will change the scope of the first activity's impacts; or both activities are integral parts of the same project. [ ] However, where the second activity is independent of, and not a contemplated future part of, the first activity, the two activities may be reviewed separately, even though they may be similar in nature. (Sierra Club v. West Side Irrigation District (2005) 128 Cal.App.4 th 690, ) The City assumes that it will control the property if the Mansion is sold to an agency such as the state or Monterey County. The contingency that the City may not have a say in the future use of the Mansion if the property is no longer part of the City (e.g., a water allocation from the County), belies the City s argument that it may choose to prepare another EIR in the future. For all the reasons stated above, the Court concludes that the EIR failed to adequately analyze the impact of an agency purchasing or leasing the property unconstrained by any conditions that the City attaches to the divestment of the Mansion. 14

15 The RFEIR must contain this analysis, and it may be necessary to recirculate the RFEIR for public comment. (B). Response to comments As noted in Flanders v. City of Carmel: Responses to comments need not be exhaustive; they need only demonstrate a good faith, reasoned analysis. [T]he determination of the sufficiency of the agency's responses to comments on the draft EIR turns upon the detail required in the responses. Where a general comment is made, a general response is sufficient. [A]n EIR is presumed adequate, and the [petitioner] in a CEQA action has the burden of proving otherwise. Satisfactory responses to comments may be provided by reference to the EIR itself. (Gilroy Citizens for Responsible Planning v. City of Gilroy (2006) 140 Cal.App.4th 911, 937, internal citations and quotation marks omitted.) (1). Surplus Land Act Letter R from Mr. Francis Lloyd, dated February 5, 2009, noted that the Government Code provides that any proposed sale must go though a process which includes offering the property to other agencies before it is offered to the general public and [n]o analysis is made in the DEIR of any impacts of these potential uses, which are foreseeable. (2AR 871.) The City responds to Letter R, in part, by stating that [a] number of public agencies will be offered the opportunity to purchase the Flanders Mansion property in accordance with the Surplus Land Act. Irrespective of who the ultimate purchaser may be, the future use of the property will be subject to the mitigation measures identified in this FDEIR, in addition to specific conditions of sale, which limit the future use of the 15

16 property to those low-intensity uses that have historically occupied the Flanders Mansion site. Additionally, analysis of alternatives of the 2005 DEIR and the RDEIR consider uses consistent with the categories of agencies that are listed in the Act. Beyond that, any analysis of the full array of potential uses that might otherwise be sought by agencies listed in the Surplus Land Act would involve a high degree of conjecture and speculation which is inappropriate in an EIR. However, in response to this comment, additional text has been added to amplify the discussion and process for the potential sale of the property though the Surplus Land Act. (2AR 878.) As noted above, the City must analyze the foreseeable impacts that may result if an agency buys or leases the Mansion, and to the extent the response is deemed inadequate, any future consideration by the City Council will include the essential information requested. (2). Mitigation by reducing the size of the parcel (a). Selling the Mansion Letter R notes that [n]o analysis is made of an alternative of divesting the structure without divesting the acreage of parkland which surrounds it. (2AR 871.) Letter R also suggested, in part, that [a] reduction in the size of the parcel to be sold or a conservation easement on a portion of the property are potential mitigation measures that are not sufficiently analyzed. (2AR 872.) The City s response to the argument that an alternative needed to be analyzed that divested the Mansion, but not the parkland that surrounds the Mansion, referenced Master Response 3a. (2AR 878.) This Master Response, Range of Alternatives, discusses in general, CEQA alternative analysis requirements, the alternatives analyzed, and 16

17 alternatives that were eliminated from a detailed analysis, (see pages 6-1 through 6-3 of the RDEIR). (2AR ) There is no mention that the City considered and rejected an alternative of selling the Mansion without the parkland that surrounds the Mansion on pages 6-1 though 6-3. (2AR ) The City also responded to this suggested alternative by stating that: The City of Carmel-by-the Sea has determined that sale of the building with no land is not considered viable. Specifically, in light of the size of the building, the City considers it impractical, untenable, and unreasonable that any potential purchaser would buy a home of this size without owning the land on which it is situated. The City has further concluded that a purchaser would reasonably expect that [a] home or building of this scope would be accompanied by some land, including a driveway and parking area, and at least a small yard area of some kind. In view of these considerations, this alternative was not included for analysis in the RDEIR. (2AR 878.) The City, in responding to the suggestion that the sale of a reduced parcel be analyzed, only responded to the second issue regarding conservation easements in response. (2AR 879.) In the City s points and authorities, the City references the 2005 FEIR to argue that selling a slightly smaller parcel, acres, was an alternative that had already been analyzed, and that Letter R was proposing that the Mansion be sold without any parkland that surrounded the Mansion, not a reduced parcel and the City responded accordingly. To the extent this response is deemed inadequate, the future consideration by the City Council will include the essential information requested. 17

18 (b). Leasing the Mansion Letter R also points out, in part, that [n]o analysis is made of an alternative of leasing only the building on the property, not the acres, plus access rights to and from it for a passive use which is no more burdensome, environmentally, to the Mission Trails Nature Preserve ( MTNP ), than is a no project alternative. (2AR 872.) The City responds by stating that such an alternative use is included in the No Project alternative, because when the property has been rented in the recent past, it has been rented without any right to exclude the public from the grounds. The City also says see Master Response 3a. (2AR ) As noted in the response to the comment about a reduction in the size of the parcel if the Mansion is sold, the City must analyze the foreseeable impacts that may result if an agency buys or leases the Mansion, to the extent the response to leasing a smaller parcel is deemed inadequate, any future consideration by the City Council will include the essential information requested. (C). Economic feasibility analysis and the RFEIR Flanders contends that the RFEIR is defective as a matter of law because it must contain the economic feasibility analysis that was produced by CBRE Consulting. (2AR ) Flanders argument is premised, in part, on this unique case, involving a historic resource that constitutes parkland that is to be sold, creating a private in-holding in Mission Trail Nature Preserve, and that the public and interested agencies should have had the opportunity to comment on the CBRE economic feasibility analysis as part of the EIR process. Flanders also asks this Court not follow Guidelines section 15131, that economic information relevant to feasibility need not be contained in an EIR, because 18

19 Guidelines section is without statutory authority and has been improperly applied in a number of appellate decisions. The City contends that the Court must recognize that the City need only follow Guidelines section 15131(c), which provides: Economic factors shall be considered by public agencies together with technological and environmental factors in deciding whether changes in a project are feasible to reduce or avoid the significant effects on the environment identified in the EIR. If information on these factors is not contained in the EIR, the information must be added to the record in some other manner to allow the agency to consider the factors in reaching a decision on the project. The City also cites to appellate decisions that provide that the economic analysis need not be in the EIR. (Sequoyah Hills Homeowners Assoc. v. City of Oakland (1993) 23 Cal.App.4 th 704, 715; San Franciscans Upholding the Downtown Plan v. City and County of San Francisco (2002) 102 Cal.App.4 th 656, 691 (San Franciscans Upholding).) Flanders supports its argument that the economic analysis must be in the EIR by citing to Save Round Valley Alliance v. County of Inyo (2007) 157 Cal.App.4 th 1437, 1461, fn 13 (Save Round Valley). Flanders argues that, as noted in Save Round Valley, if the key to feasibility is economic, that analysis must be in the EIR. Flanders citation to Save Round Valley provides in full: We do not suggest that an economic analysis is necessarily required in order to address the feasibility of the land exchange alternative. (See Sierra club v. County of Napa, supra, 121 Cal.App.4 th at pp [CEQA does not require analysis of economic feasibility].) If, for example, the County concludes that the basis objectives of the project cannot be achieved regardless of economic 19

20 feasibility, an analysis of economic viability may not be necessary. If however, the County relies upon economic viability as a basis for finding the alternative infeasible, it must support its conclusion by applying the correct standard to the applicable facts. The Save Round Valley court, in the footnoted paragraph, stated in part that there was nothing in the EIR that informs the public or decision maker of the price or comparative value of the BLM parcel. (Save Round Valley, supra, 157 Cal.App.4th. at p ) This Court cannot draw the same inference as Flanders, that Save Round Valley, and the other cases and statutes cited by Flanders, in light of the Guidelines, statutes and cases cited by the City, mandate that the economic feasibility analysis as a matter of law must be in the EIR. (D). Economic feasibility analysis Flanders contends that the CBRE report was faulty and inadequate as a matter of law. Flanders points out that the Mansion is parkland, a uniquely-valued property that is protected by City policies. Flanders argues that because the Mansion was never intended to be a commercially profitable property, economic feasibility must be based on whether the City can continue ownership, taking into consideration the Mansion s historic place in the community, and not burden the neighborhood. Thus, because the CRBE report did not look at the relevant economic factors of leasing a historic mansion located on parkland, or the City s financial capacity to restore and maintain the Mansion, the report failed to meet the ruling in Flanders v. City of Carmel wherein this Court stated that absent substantial evidence in the form of an 20

21 economic analysis that most project objectives could not reasonably be accomplished via lease, the project cannot be approved under CEQA mandates. (Flanders 1 st request for Judicial Notice, Amended Judgment at 2.) Flanders points out that the CBRE report looked at office building values such as medical and office buildings which are not comparables for the Mansion property. (2AR , 1534.) The City responds by contending that the CBRE economic analysis is not required to address the City s finances or the City s capacity to bear maintenance costs related to the Mansion because the financial situation of the project proponent, the City, is not relevant. (Uphold our Heritage v. Town of Woodside (2007) 147 Cal.App.4th 587, (Uphold Our Heritage.) The City also argues that after an exhaustive search, the CBRE report identified three properties which were clearly relevant comparables (2AR ), which were adequate and done in good faith. (Citizens of Goleta Valley v. Board of Supervisors (1988) 197 Cal.App.3d 1167, 1176 (Goleta I).) The EIR is an informational document with the stated purpose of providing public agencies and the public with 'detailed information about the effect which a proposed project is likely to have on the environment; to list ways in which the significant effects of such a project might be minimized; and to indicate alternatives to such a project. An EIR should be prepared with a sufficient degree of analysis to provide decisionmakers with information which enables them to make a decision which intelligently takes account of environmental consequences. An evaluation of the environmental effects of a proposed project need not be exhaustive, but the sufficiency of 21

22 an EIR is to be reviewed in the light of what is reasonably feasible. Technical perfection is not required; the courts have looked not for an exhaustive analysis but for adequacy, completeness and a good-faith effort at full disclosure. (Rio Vista Farm Bureau Center v. County of Solano (1992) 5 Ca.App.4 th 351, 368 (Rio Vista), citations and quotations omitted.) Although the Rio Vista court was discussing an EIR, as noted earlier, information regarding an economic feasibility analysis may be utilized even if not included in an EIR to discuss the adequacy of alternatives, and inferentially, the court would look for adequacy, completeness and a good-faith effort at full disclosure of such economic information. Flanders and the City differ on the impact of Uphold Our Heritage on the issue of whether the City s budget and financial needs should have been included in the CBRE report. In Uphold Our Heritage, the Appellate Court rejected the EIR s analysis because no information was forthcoming about the costs of a new home, and no comparison of the relative costs of the project and the alternates could be conducted. (Uphold Our Heritage, supra, 147 Cal.App.4 th at pp ) This Court recognizes that this case is extraordinary because an apparent solvent city seeks to divest itself of a historic structure that constitutes parkland, and the Mansion is central to the Mission Trail Nature Preserve. Nevertheless, the Uphold Our Heritage court, citing to Maintain our Desert Environment v. Town of Apple Valley (2004) 124 Cal.App.4 th 430, stated that the wealth 22

23 or ability to shoulder the costs of the proposed alternative is irrelevant. (Uphold Our Heritage, supra, 147 Cal.App.4 th at p 599.) The City s budget and financial status did not have to be included in the CBRE report. The CBRE report examined three comparable properties. These were significant historic homes meeting at least three criteria: [1] Located in a residential neighborhood, with an affluent population and close to a park or other public open space; [2] Recently restored or repaired; [3] Currently or formerly publicly owned. (2AR 554.) The CBRE report acknowledged that the three properties ranged considerably in their comparability to the Mansion but concluded that the comparables helped in creating observations about historic reuse of single-family homes with similar characteristic and neighborhood settings. The CBRE report summarized the observations as follows: Some non-residential uses involve little or no significant public access or activity. However, if there is some level of access activity, extensive public outreach has been successful in mitigating neighborhood concerns. The public process may also aid in fundraising effort. For a non-residential use traffic and parking impacts may be addressed through detailed conditional use permit requirements, mitigation measures and/or conditions of sale drafted to take into account the comments of the community. These conditions may limit the volume and timing of visits. Transporting visitors to the property from a remote location may be a possible solution. Most importantly, generation of revenue for repairs, rehabilitation, and subsequent maintenance is a sizable challenge. Visitor fees cannot be expected to 23

24 cover costs associated with repairs and rehabilitation, or even ongoing maintenance. In one case study, we found that residential rental income might almost offset the City s ongoing maintenance responsibilities; however, it is essential to note that rehabilitation has already occurred, and at a small fraction of the cost currently estimated for the Flanders Mansion Property. (2AR 555.) The CBRE report analyzes eight comparables in an effort to estimate the market value of the Mansion after restoration, provided the Mansion is of good quality and condition when sold as a residence. (2AR ) The CBRE report also contains a section that values the Mansion when leased by the City for residential use. The CBRE report looked at five comparable rentals on the Monterey Peninsula, assuming that the Mansion had been restored and is in very good condition in the attempt to estimate rental income. (2AR ) As pointed out by Flanders, the CBRE report also estimated the market value of the Mansion by a comparison with six non-residential properties, also assuming that restoration had been completed, and the Mansion was in good condition. This analysis is based on the Mansion being used for a non-residential purpose. (2AR ) The CBRE report also provides information about five comparable nonresidential rentals, assuming restoration and a very good condition of the Mansion. (2AR ) Finally, the CBRE report summarizes the four scenarios and compares the market values. (2AR 638.) The Court notes that it was difficult for the consultant to find comparables because the Mansion is truly unique. However, the Court cannot find as a matter of law 24

25 that the City did not make an adequate, complete, and a good-faith effort at full disclosure of the economic information. (E). Feasibility of the lease of the Mansion Public Resources Code section provides: The Legislature finds and declares that it is the policy of the state that public agencies should not approve projects as proposed if there are feasible alternatives or feasible mitigation measures available which would substantially lessen the significant environmental effects of such projects, and that the procedures required by this division are intended to assist public agencies in systematically identifying both the significant effects of proposed projects and the feasible alternatives or feasible mitigation measures which will avoid or substantially lessen such significant effects. The Legislature further finds and declares that in the event specific economic, social, or other conditions make infeasible such project alternatives or such mitigation measures, individual projects may be approved in spite of one or more significant effects thereof. In order for Carmel to meet the objective of the project, divestment of the Mansion, the RFEIR must comply with Public Resources Code section , which states: In order to achieve the objectives set forth in Section 21002, the Legislature hereby finds and declares that the following policy shall apply to the use of environmental impact reports prepared pursuant to this division: [ ] (a) The purpose of an environmental impact report is to identify the significant effects on the environment of a project, to identify alternatives to the project, and to indicate the manner in which those significant effects can be mitigated or avoided. [ ] (b) Each public agency shall mitigate or avoid the significant effects on the environment of projects that it carries out or 25

26 approves whenever it is feasible to do so. [ ] (c) If economic, social, or other conditions make it infeasible to mitigate one or more significant effects on the environment of a project, the project may nonetheless be carried out or approved at the discretion of a public agency if the project is otherwise permissible under applicable laws and regulations. [I]n order to approve a project that would have a significant environmental impact, the City [of Carmel-by-the-Sea] was required to make findings identifying (1) the [s]pecific considerations that make infeasible the environmentally superior alternatives and (2) the specific benefits of the project [which] outweigh the environmental harm. (See Pub. Resources Code, , subd. (b), 21081; Guidelines, 15092, subd. (b).). (Preservation Action Counsel, supra, 141 Cal.App.4 th at p. 1353, emphasis in original, quotations ommited.) [T]he feasibility of the alternatives must be evaluated within the context of the proposed project. The fact that an alternative may be more expensive or less profitable is not sufficient to show that the alternative is financially infeasible. What is required is evidence that the additional costs or lost profitability are sufficiently severe as to render it impractical to proceed with the project. While an EIR need not analyze every imaginable alternative or mitigation measure, it should evince good faith and a reasoned analysis. (Uphold Our Heritage, supra, 147 Cal.App.4 th at p. 599, citations and internal quotations omitted.) Some issues for this Court to consider are [w]hether the marginal costs of the alternative as compared to the cost of the proposed project are so great that a reasonably prudent property owner would not proceed with the sale (Uphold Our Heritage, supra, 26

27 147 Cal.App.4 th at p. 600); [t]he mere fact that an alternative might be less profitable does not itself render the alternative infeasible (Preservation Acton Council, supra, 141 Cal.App.4 th at p. 1357); and whether the City cannot achieve the same economic objective from [leasing] the [Mansion] property is not determinative, impracticability must be shown (Save Round Valley, supra, 157 Cal.App.4 th at p. 1461, emphasis in original.) Flanders contends that the lease of the Mansion is feasible and that there is no substantial evidence to support the City s contention that (1) a lease is economically infeasible; or (2) against City policy. The City contends that the lease of the Mansion as a single-family residence, or as a public/quasi-public use, is infeasible on economic grounds. (2AR 1880, 1884.) The City argues that substantial evidence shows that the single-family lease alternative is virtually impossible in a situation where a lessee is responsible for the $1,157,000 cost to rehabilitate the Mansion because the market for comparable single-family rental is exceedingly thin in the vicinity of the Flanders Mansion Property and, in fact, nonexistent where lessees are responsible for rehabilitating a property. (2AR 551.) The City points out that the CBRE report also found a non-existent market for non-residential rental when the lessee is required to rehabilitate the property. The breakeven point for leasing the Mansion is calculated by CBRE to be 17 years as a singlefamily home and 8.7 years as a non-residential property. (2AR 551.) The City points out that regardless if the City paid for the rehabilitation costs, a sale would net $2,843,000 if the Mansion is sold as a single-family home, and a non- 27

28 residential sale would net $890,000, which is money that can be used to benefit the citizens of the City of Carmel-by-the-Sea. (2AR 550.) The City argues that comparing the break-even time with the monies that would be received upon sale, meets the criteria as set forth in Citizens of Goleta Valley, supra, (1988) 197 Cal.App.3d at p. 1180, and supports the City s finding that a lease is infeasible. The Goleta I court did not find "in the record any evidence which analyzes that alternative in terms of comparative costs, comparative profit or losses, or to the extent appropriate, comparative economic benefit to the Respondent, nearby communities, or the public at large, whereas here, the CBRE report and the RFIER contain this information. The City also argues that this situation is analogous to the case of San Franciscans Upholding, supra, 102 Cal.App.4 th at pp. 693, 695, wherein that court found economic infeasibility based on the disparity between alternatives and the project because of additional costs and lost profitability that were sufficiently severe as to render them impractical. The City argues that given the initial investment to rehabilitate the Mansion, combined with the fact that the City will not see a return for either 8.7 or 17 years, and assuming that the Mansion can be rented given the exceedingly thin market for the entire period, the comparative differences in the amount of money that the City can receive by selling the Mansion versus leasing, is sufficiently severe as to render the lease alternative impractical. Finally, the City contends that the lease is infeasible on public policy grounds. The City s argument is that because the project objective is to sell the Mansion and a 28

29 lease will not meet the project objective, a lease is infeasible under CEQA. (2AR ) In support of this argument, the City cites to California Native Plant Society v. City of Santa Cruz (2009) 177 Cal.App.4 th 957, The City cites to portions of Resolution No , A Resolution Adopting a Statement of Overriding Considerations, in support of its infeasibility finding of the lease alternative, (2AR ), and looks to the CBRE report for the substantial evidence in the record in support of a infeasibility finding. (2AR ) Finding 5, of Resolutions No , provides in full: The City Council finds that even though adopting the Sale with Conservation Easements and Mitigation has lessened significant effects on the environment[,] certain other environmental impacts and cumulative environmental impacts, may remain significant and unavoidable. The City Council finds, pursuant to CEQA section 21081(b) and CEQA Guidelines section 15093, that the specific economic, legal, social, technological and other benefits of the Project outweigh the Project s unavoidable adverse environmental impacts, and therefore, the impacts are acceptable. The following describes the significant and unavoidable impacts, alternative analysis, infeasibility analysis and the Sale with Conservation Easements and Mitigation alternative for the purpose of providing supporting evidence for the City s adoption of statements of overriding considerations. (2AR 1873.) The City incorporated A Resolution Certifying the Recirculated Final Environmental Impact Report and the findings and conclusions of the RFEIR. (2AR 1873.) The two remaining significant unavoidable impacts were: 29