SAN DIEGO—A California Supreme Court case deciding responsibility for funding mitigation as a result of CSU's plan to expand the SDSU campus could impact private developers, Sacramento-based Stoel Rives' attorney Allison Smith tells GlobeSt.com. City of San Diego v. Board of Trustees of the California State University involves the obligation of CSU to pay fair-share traffic-mitigation fees to the City of San Diego following the environmental review of CSU's plan to expand the San Diego State University campus and increase enrollment. The City of San Diego challenged the environmental review of that plan, primarily because CSU found that expansion would have significant impacts on traffic in the area around SDSU, but CSU did not promise to help pay for improvements that would mitigate those traffic impacts. That meant that the City could end up footing the bill, or some or all of the improvements wouldn't be done. CSU agreed to pay its “fair share” of the costs of these improvements if it was appropriated additional funding by the Legislature for that purpose. For more information on the case, click here. For a brief on the case, click here.

We spoke exclusively with Smith, who has been following the case closely, about the key real estate issues in the case and what she believes is the most likely outcome.

GlobeSt.com: What do you see as the key issues for the real estate industry in City of San Diego v. Board of Trustees of the California State University?

Smith: While this case concerns the responsibilities of a publicly funded entity under the California Environmental Quality Act, the Supreme Court's decision has the potential for ripple effects for private real estate developers in San Diego and across the state. The case revolves around the obligation of California State University to pay fair-share traffic-mitigation fees to the City of San Diego. CSU has determined that the fees are adequate mitigation under CEQA for the significant impacts CSU's expansion of the State University campus will have on traffic.

But, CSU believes it should only be required to pay the fees if the Legislature allocates additional funds to CSU for the payments. The City of San Diego argues that CSU is required to pay the fees under CEQA even if additional funding is not provided. If the Supreme Court agrees with CSU, and the Legislature fails to provide additional funding for the fair-share impact fees, CSU doesn't intend to pay the mitigation fees. What this boils down to is whether CSU has to pay for the impacts its expansion has on the areas surrounding the campus, which would directly affect those neighborhoods.

If the City has less funding for needed road improvements, they may not get done as quickly, or at all. Deteriorated traffic conditions and neglected road improvements in an area are never attractive to a private developer. Also, while the next private project in the SDSU area undergoing CEQA review can only be required to mitigate its own significant traffic impacts, if background traffic conditions are worse than they would otherwise be in the area, the impacts of the new project could tip over the threshold into significance where they might not otherwise. So, private developers could start to feel the indirect effects of this Supreme Court case if state-funded colleges and universities can avoid mitigating some off-site impacts under the decision.

GlobeSt.com: What do you believe is the most likely outcome of the Supreme Court decision?

Smith: The trial court ruled in favor of CSU, and the court of appeal overturned that decision, ruling for the City, so there is no guarantee where the Supreme Court will come out on this case. The Supreme Court will look directly at CSU's actions and determine if CSU abused its discretion in finding that the payment of fair-share traffic-mitigation fees was infeasible if additional monies are not allocated by the Legislature. The reach of this case beyond CSU and this particular project to the actions of other state-funded agencies really depends on the treatment the Supreme Court gives the issue. The decision could be written broadly enough to address the obligation of any publicly funded agency to pay for off-site mitigation, or the Supreme Court could expressly state that its decision is fact-specific and tailored to these particular circumstances.

GlobeSt.com: What should San Diego developers keep in mind when dealing with EIR issues that may involve funding from the Legislature?

Smith: With a decision in CSU's favor, the Supreme Court would give state colleges and universities a potential end run around funding mitigation for the significant environmental impacts of future projects, at least where the mitigation will be implemented by another agency or jurisdiction and the Legislature declines to allocate additional funding for the mitigation. By analogy, other state agencies may try to take advantage of the same loophole. The obligation of private developers to pay to mitigate significant off-site impacts of their particular projects would not shift, though, even if the private entities receive public monies or incentives.

GlobeSt.com: What else should our readers take away from this case?

Smith: CSU has brought up the larger issue of whether it should be forced to siphon money for the traffic-impact fees from its core activities, in the absence of additional funding from the Legislature. The Supreme Court is unlikely to make this case a referendum on whether CEQA and expensive mitigation should, or must under CEQA, trump the educational mission of publicly funded colleges and universities. But, with large-scale CEQA reform unsuccessful to date in the Legislature, I will be interested to see whether the Supreme Court ends up making a new law with this CEQA case or the others before it this session.