The power of cities and counties to adopt laws restricting the development of certain commercial projects, particularly large “superstores,” and do so without reviewing environmental effects under the California Environmental Quality Act (“CEQA”) was recently confirmed by the California Court of Appeal.

After Wal-Mart expressed an interest in building a “supercenter” on a site in Turlock, the City enacted two ordinances amending its zoning regulations and specific plan to require developers of discount stores and discount superstores to obtain conditional use permits and to entirely prohibit the construction of discount clubs (defined as stores where shoppers pay a fee to take advantage of discounted prices on items such as food, clothing, and appliances). Wal-Mart sued, claiming that the ordinance was an unconstitutional use of the City’s police powers and that the City failed to undertake the necessary environmental review required by CEQA. The trial court rejected these claims, and Wal-Mart appealed.

The appellate court ruled, in Wal-Mart Stores, Inc., et al. v. City of Turlock, that the City’s enactment of a zoning amendment restricting discount superstores was a valid exercise of the City’s police powers under Article 11, Section 7, of the California Constitution and, further, the enactment of the ordinance was exempt from CEQA under Guidelines section 15183, which provides: “CEQA mandates that projects which are consistent with the development density established by existing … general plan policies for which an EIR was certified shall not require additional environmental review, except as might be necessary to examine whether there are project-specific significant effects which are peculiar to the project or its site. This streamlines the review of such projects and reduces the need to prepare repetitive environmental studies…(i) Where the prior EIR relied upon by the lead agency was prepared for a general plan … that meets the requirements of this section, any rezoning action consistent with the general plan … shall be treated as a project subject to this section.”

The court held that the police power empowers cities to control and organize development within their boundaries as a means of serving the general welfare. The administrative record here demonstrated, said the court, that the ordinance was reasonably related to these welfare concerns. The City passed the ordinances to protect the economic viability of existing neighborhood-serving shopping centers. Evidence suggested that the placement of discount superstores in close proximity to an anchor grocery store tends to put the anchor out of business. In an agenda report to the City Council, the City’s Planning Manager argued that a troubling domino effect ensues: the smaller stores in the center close because these stores rely upon foot traffic generated by the anchor, which results in suburban decay due to high vacancy rates. In addition, City centrally located shopping centers throughout Turlock to create land use patterns to encourage walking and biking, whereas more remote, region-serving retail discount superstores require automobile use.

With respect to CEQA, the court concluded that the exemption in section 15183 applied because the zoning amendments were consistent with City’s general plan and were adequately covered by the earlier environmental impact report prepared for the general plan. Moreover, noted the court, the administrative record did not show any reasonably foreseeable project-specific changes in the environment that were significant and peculiar to the zoning amendments or the site in question.

Wal-Mart challenged the City’s reliance on the streamlining procedures of section 15183, contending that the prior EIR did not analyze significant environmental effects peculiar to the ordinance or potentially significant off-site impacts. Wal-Mart argued the ordinance would cause indirect environmental impacts due to physical changes resulting from the possible development of a multi-tenant shopping center where Wal-Mart planned to build its supercenter or by the physical changes related to the possible construction of a supercenter outside City’s boundaries.

The court rejected these arguments, holding that the administrative record lacked substantial evidence to support Wal-Mart’s claims that a multi-tenant shopping center would ultimately be constructed on the site or in the vicinity of the City’s limits. The court found that a letter from a real estate developer who opined that it was more likely than not that a large supermarket was the most probable occupant for the real property at issue constituted inadmissible and unsubstantiated opinion as opposed to admissible “expert opinion supported by facts.”

The Wal-Mart decision is notable because the court left the door open for a later CEQA review, should either of the two scenarios proposed by Wal-Mart transpire. The court wrote: “[I]t is too soon for the detailed environmental analysis urged by Wal-Mart. The impacts Wal-Mart wants analyzed are more closely related to later activities and thus are not peculiar to the adoption of the zoning amendments.” The environmental analysis thus may have been postponed, but perhaps not altogether prohibited.

Anne Arnold
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
Fax: (415) 398-5630

Disclaimer: In our Newsletters and Bulletins, Briscoe Ivester & Bazel LLP intends to present general information to the public and does not intend to provide legal advice pertaining to a particular situation.


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