California Supreme Court Provides Guidance on Agreements for Development Made Contingent upon Subsequent CEQA Review in Save Tara v. City of West Hollywood

The court did provide some guidance on the types of agreements that do not require prior CEQA review, and acknowledged that there are some circumstances under which "preliminary" agreements do not trigger CEQA review. The court noted that "such preliminary or tentative agreements may be needed in order for the project proponent to gather financial resources for environmental and technical studies, to seek needed grants or permits from other government agencies, or to test interest among prospective commercial tenants," and acknowledged that requiring public agencies to "engage in the often lengthy and expensive process of EIR preparation before reaching even preliminary agreements with developers could unnecessarily burden public and private planning." However, the court emphasized that prior to completion of CEQA review for a proposed project, the agency must not take actions that would foreclose consideration of mitigation measures and alternative projects in order to address environmental impacts. The court stated that "if the agreement, viewed in the light of all surrounding circumstances, commits the public agency as a practical matter to the project, the simple insertion of a CEQA compliance condition will not save the agreement from being considered an approval requiring prior environmental review." Factors the court identified included: City public statements that it would proceed with the project; City actions in preparing tenants for relocation; the City's substantial financial contribution to the project; and agreement terms binding the City to convey property to the developer if CEQA requirements were satisfied "as determined by the City Manager." The court found that these factors demonstrated that the agreement committed the City to a definite course of action regarding the project before fully evaluating its environmental effects.

The balancing test formulated by the court in Save Tara is intended to further CEQA principle that environmental review should occur after there is enough information about a proposed project to allow meaningful evaluation of environmental impacts, but early enough to serve CEQA's intended function of informing decision makers. Importantly, the court said the test was a legal question for the courts to independently review, without the deference to the agency's conclusions allowed under the substantial evidence test.