Society Hill Towers Owners' Association, Robert D. Greenbaum Zoe Coulson John Q. Lawson Jeremy Siegel Penelope H. Batcheler Gray Smith Roxanne Galeota v. Edward G. Rendell, Mayor of the City of Philadelphia City of Philadelphia Andrew M. Cuomo, Secretary of Housing and Urban Development United States Department of Housing and Urban Development

Citation: 210 F.3d 168Docket: 98-1937

Court: Court of Appeals for the Third Circuit; April 18, 2000; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Society Hill Towers Owners' Association and seven individuals (the "Residents") appealed a district court's summary judgment favoring the City of Philadelphia and former Mayor Edward G. Rendell, along with the United States Department of Housing and Urban Development (HUD) and its Secretary Andrew M. Cuomo. The Residents contended that the City failed to conduct necessary environmental and historical reviews under the National Environmental Policy Act (NEPA) and the National Historic Preservation Act (NHPA) before HUD approved a $10 million Urban Development Action Grant (UDAG) for a hotel and parking garage project at Penn's Landing. They also argued that the City did not provide adequate public hearings in compliance with regulatory requirements prior to amending its application for the UDAG. The court affirmed the lower court's ruling, referencing the extensive factual background detailed in the district court's opinion. The original UDAG application was submitted in 1986 to support a festival park project, aimed at stimulating economic development in areas facing economic distress. Although the application received preliminary approval and several amendments were made, the festival park was never built, and the federal funds related to the UDAG grant were never disbursed.

In September 1994, the City submitted a fifth amendment to its 1986 UDAG application, abandoning the original festival park concept in favor of constructing a 350-room hotel and a 500-vehicle garage. This amendment was considered a completely new project. HUD approved the amendment in November 1994, contingent upon the City holding public hearings, which were sparsely attended. Following the hearings, local residents, unaware of the project before the hearings, began voicing their opposition to the City and HUD.

In August 1996, after additional hearings that were well attended and marked by strong opposition from residents, the City published a Finding Of No Significant Impact (FONSI) and a Notice of Intent/Request for Release of Funds (NOI/RROF). HUD later deemed the fifth amendment request defective and suggested it be withdrawn until regulatory compliance was met. The City subsequently withdrew the request but submitted a revised one on the same day, although it maintained the same project description with different developer and financing details. HUD approved this revised request despite its similarities to the withdrawn one.

On July 24, 1997, local residents filed a lawsuit seeking declaratory and injunctive relief, arguing that the City failed to provide a meaningful opportunity for public comment and did not conduct proper environmental and historic reviews. They sought to halt UDAG funding until an Environmental Impact Statement (EIS) was prepared and to have the court declare the City's public hearing process inadequate. The district court granted summary judgment for the defendants, leading to an appeal.

NEPA mandates that federal agencies prepare an Environmental Impact Statement (EIS) for major actions significantly affecting the environment. However, HUD can delegate its environmental review responsibilities for Urban Development Action Grant (UDAG) applications to the applicants. HUD's regulations (24 C.F.R. Part 58) outline procedures for this environmental review. An Environmental Assessment (EA) is initially prepared to assess potential environmental impacts. If the EA concludes that there will be no significant impact, a Finding of No Significant Impact (FONSI) must be published for public comment. If there is significant public interest or controversy, a 30-day comment period is required before funding can be released.

Although NEPA does not explicitly address the EA process, the Council on Environmental Quality (CEQ) has regulations that guide public participation, requiring agencies to consider holding public hearings based on the level of environmental controversy or public interest. Agencies must make findings of no significant impact available to the public, but a FONSI must only be publicly reviewed if the action is similar to those normally requiring an EIS or if it is unprecedented.

HUD's regulations do not mandate public hearings during the EA preparation but require consideration of a hearing if an EIS is needed. FONSIs must be available for public review for 30 days if there is considerable interest or controversy surrounding the project.

HUD does not mandate public hearings for grant recipients during the Environmental Assessment (EA) process; however, public participation is required in the general grant application process under the UDAG program. Specifically, applicants must conduct public hearings before submitting a full application to gather input from citizens, particularly those living near the proposed project. When applying, UDAG applicants must include the status of the environmental review, any notifications to federal agencies regarding joint funding, and a timetable for environmental actions. Additionally, they must certify compliance with citizen participation requirements and impact analysis before application submission.

In the district court, the City contested the Residents' standing through a motion to dismiss, but the court assumed standing and ruled on the merits without resolving the standing issue. The Supreme Court has warned against this approach, emphasizing that assuming jurisdiction to address the merits can lead to "hypothetical jurisdiction," which is akin to issuing an advisory opinion. The Court highlighted the importance of addressing jurisdiction as a prerequisite to examining the merits, asserting that courts must evaluate their jurisdiction independently. Consequently, the inquiry begins with determining whether the Residents possess standing to challenge the UDAG grant awarded under the City's amended application.

Article III constitutional standing requires: (1) the plaintiff must have suffered an injury in fact, which is (a) concrete and particularized and (b) actual or imminent; (2) there must be a causal connection between the injury and the defendant's conduct, meaning the injury is traceable to the challenged action and not due to a third party; (3) it must be likely that a favorable decision will redress the injury. In the case at hand, the Residents claimed standing based on their concerns regarding a project funded by UDAG, asserting it would increase traffic, pollution, and noise, negatively impact their historic neighborhood's ambiance, impair their enjoyment of Penn's Landing, and decrease property values. The Residents also contended that the City should have prepared an Environmental Impact Statement (EIS) and taken measures to mitigate the project's effects, as required under NEPA and NHPA. The City countered that the Residents failed to identify legally cognizable injuries or provide evidence supporting their claims. However, the court noted that the City's argument conflated standing with issues of proof, affirming that the Residents were alleging injuries to a legally protected interest—maintaining their neighborhood's environmental and historic quality. The regulatory frameworks of NEPA and related statutes aim to protect individuals directly affected by such projects, suggesting that if the Residents do not have standing, it would be difficult to identify anyone who could.

The excerpt addresses the significance of public hearings and input in the context of a federally funded project, arguing that without meaningful participation, these processes are merely procedural formalities that fail to protect those most affected, particularly local residents. The Residents claim specific injuries, including increased traffic, pollution, and noise, which they argue will diminish their quality of life and property values. Their assertions are presented as genuine, establishing their standing to challenge the UDAG grant. In contrast, the City contends its duty extends to all Philadelphia residents, emphasizing the broader benefits of the project. However, the excerpt underscores that the Residents' concerns are immediate and directly related to their neighborhood, distinguishing their interests from those of more distant stakeholders. This distinction reinforces the validity of the Residents' standing under Article III, as their grievances are not generalized but specific to their circumstances.

Residents have established the causation and redressibility requirements for Article III standing, as their alleged injury directly arises from the proposed project's construction. The City may remedy this injury by thoroughly evaluating the project's environmental and historical impacts and taking appropriate mitigation actions. Standing also involves prudential considerations: plaintiffs must assert their own legal rights rather than those of third parties, avoid generalized grievances, and ensure their claims fall within the relevant statute's protective zone. The Society Hill Residents are asserting their interests, which are protected under NEPA and NHPA, confirming their standing to sue.

The Residents argue that the district court incorrectly granted summary judgment to the City and HUD on their claims under the APA, NEPA, and NHPA. They contend that the City's environmental review and HUD's approval were arbitrary and capricious, lacking meaningful public participation, failing to consider cumulative impacts in the Penn's Landing area, neglecting appropriate alternatives, and not adequately addressing public controversy regarding the environmental impact statement requirement. 

The standard of review for appeals under the APA requires a thorough evaluation of the agency's actions. While agency decisions are generally presumed regular, this does not exempt them from rigorous scrutiny. The court must determine if the agency acted within its authority and if its decisions were not arbitrary, capricious, or in violation of the law, considering all relevant factors and ensuring no clear error in judgment occurred. However, the court cannot replace the agency's judgment but must verify procedural compliance.

The case revolves around the City's decision to forgo preparing an Environmental Impact Statement (EIS) based on its Finding of No Significant Impact (FONSI) following an Environmental Assessment (EA). The standard of review for the City's decision, while not universally agreed upon, is established as arbitrary and capricious, following precedent from Marsh v. Oregon Natural Resources Council. The district court's application of this standard was deemed appropriate and is upheld.

Residents challenge the adequacy of public participation in the City’s hearings related to the proposed project. They argue that HUD regulations mandated public hearings prior to the submission of the amended grant application and before determining the project's environmental impact. Residents allege that the hearings lacked substance as the City had already committed to the project, disregarding public opposition voiced during these sessions. They cite statements from City officials indicating that the project was a "done deal" prior to the hearings, suggesting a lack of genuine engagement with community concerns. Consequently, the Residents assert that the City's resubmission of a similar application failed to address the regulatory and statutory deficiencies inherent in the original UDAG application.

The statutory and regulatory framework for UDAG grants mandates public hearings prior to application submission. However, regulations allow applicants to rectify procedural defects by withdrawing a flawed application, addressing the issues, and resubmitting it. In this case, the initial application lacked proper public notification and hearings, which resulted in its withdrawal. After conducting the required hearings, the application was resubmitted. Although Residents felt their concerns were overlooked initially, the record indicates that the City did consider their input, even if not to their satisfaction. Consequently, the decision to forgo an Environmental Impact Statement (EIS) was not deemed "arbitrary or capricious" under the Administrative Procedure Act (APA).

Cumulative impacts of the project on the neighborhood must be assessed as per CEQ regulations, which require that when an Environmental Assessment (EA) results in a Finding of No Significant Impact (FONSI), the agency must explain why the action will not significantly affect the environment. CEQ identifies factors for determining significance, emphasizing that even individually minor impacts can be significant when considered cumulatively with other actions. Cumulative impact is defined as the effect of an action combined with other past, present, and reasonably foreseeable actions, regardless of who undertakes them. HUD advises that related activities should be evaluated as a single project. The Supreme Court in Kleppe v. Sierra Club stated that when multiple proposals with cumulative impacts are pending, their environmental consequences must be analyzed together, but this does not extend to unfounded concerns.

The statute focuses exclusively on proposed actions and does not mandate agencies to consider the potential environmental impacts of less immediate actions when preparing an Environmental Impact Statement (EIS). If a contemplated action progresses to formal proposals, the EIS will evaluate its environmental effects, which will also consider the impacts of prior proposed actions. The D.C. Circuit Court in National Wildlife Federation v. FERC affirmed that an EIS is not required to assess hypothetical project impacts but should concentrate on the specific proposal and any related pending or recently approved proposals. The Eighth Circuit in Sierra Club v. Froehike explained that if a project is independent, an EIS for that single project suffices for compliance, as there is no significant resource commitment beyond what is necessary for that project. Similarly, the Fourth Circuit in Webb v. Gorsuch ruled that the impact of other proposed projects must be considered in an EIS only if they are interdependent to the extent that completing one without the others would be illogical. This standard was also adopted by the Tenth Circuit, which concluded in Airport Neighbors Alliance v. U.S. that separate elements of an airport's master plan were not sufficiently interdependent to necessitate a cumulative EIS. The court cautioned against the impracticality of analyzing uncertain future actions in a long-term plan, emphasizing that such requirements would misallocate resources and undermine NEPA's effectiveness in environmental analysis for significant federal actions.

The Court of Appeals for the Fifth Circuit upheld the City of New Orleans' limited environmental review under the UDAG program for a hotel, retail, and parking development, ruling that subsequent phases of the City's Master Plan were too "indefinite and speculative" due to the absence of final plans or funding commitments. While some courts advocate for a broader assessment of cumulative impact, the court emphasized that such analysis should consider the interdependence and likelihood of project completion. The Residents argued the City's Environmental Assessment (EA) was inadequate for not addressing the impacts of future developments, such as a proposed "mega" entertainment complex. However, the court found that merely proposed projects lacking concrete plans do not necessitate inclusion in the EA. The district court rightly determined that the hotel project could function independently and that no evidence indicated the future developments were likely to materialize. Consequently, the court concluded that the City was not obligated to perform a cumulative impact analysis in the EA, as NEPA only requires consideration of concrete proposals. Furthermore, even if the proposed projects were to be completed, they were not deemed interdependent enough to affect the City's Finding of No Significant Impact (FONSI).

The success of a hotel and parking garage at Penn's Landing is independent of an entertainment complex's construction, and plans for the area are frequently updated. The City is not obligated to continuously assess environmental impacts for each change in Penn's Landing's development plans, especially when such projects are uncertain. Under NEPA, federal agencies must analyze reasonable alternatives to proposals with unresolved resource conflicts, as stated in 42 U.S.C. 4331(2)(E). The CEQ regulations require Environmental Assessments (EAs) to briefly discuss the proposal's need, alternatives, and environmental impacts. HUD regulations further mandate that EAs explore modifications to mitigate adverse environmental impacts and examine project alternatives, including the no-action option. 

Residents claim the City's finding of no significant impact was arbitrary, asserting that an alternative site south of Market Street would better accommodate a hotel, offering a larger footprint and reducing traffic issues in Society Hill. The City rejected this alternative based on a Development Plan aimed at preserving views, proximity to historic sites, and the high costs of relocating existing sewer infrastructure. The Residents argue these reasons are invalid, referencing a long-standing plan for a 50-story office tower at the alternative site. NEPA requires consideration of appropriate alternatives but does not compel selection of any specific one. The City evaluated the Residents' alternative and provided justifications for its rejection while noting that new traffic analyses were conducted in response to public comments.

The Residents argue that the City's decision not to select an alternate location for a project is arbitrary and capricious, citing over 25 years of plans to build a larger structure at the same site near Market Street. However, they have not demonstrated the City’s actual intent to proceed with that construction. The Residents further contend that public controversy surrounding the project necessitates the preparation of an Environmental Impact Statement (EIS). According to the Council on Environmental Quality (CEQ), one of the ten factors for determining the need for an EIS is the degree of controversy regarding the project's environmental effects. However, legal precedent indicates that "controversial" refers to significant disputes over the project's size, nature, or effects, rather than mere neighborhood opposition. The Residents have not substantiated a significant dispute regarding the environmental impacts identified by the City in its Environmental Assessment (EA); their concerns primarily pertain to the chosen location. Consequently, the existence of a controversy, even if acknowledged, does not warrant a conclusion that the City's Finding of No Significant Impact (FONSI) was arbitrary and capricious.

Additionally, the Society Hill Residents claim that the district court erred in granting summary judgment to the City and HUD regarding their National Historic Preservation Act (NHPA) claim. NHPA regulations require UDAG applicants, rather than HUD, to identify and assess the impact of projects on National Register properties. If an applicant determines there is no effect on identified historic properties, the project does not require further review unless an objection is raised. The applicant must also seek comments from the Advisory Council on Historic Preservation to fulfill their NHPA responsibilities. If required information is not provided, it may delay the process.

The Executive Director must respond to an applicant within 15 days of receiving the required information under section 801.7(a). If there is no objection from the Executive Director within that timeframe, the applicant is deemed to have fulfilled their obligations under section 106 of the Act, and no further Council review is necessary. Key documentation needed for a Determination of No Adverse Effects includes: (i) a project overview and chronology; (ii) project descriptions along with supporting visuals; (iii) National Register forms or eligibility documentation for affected properties; (iv) an explanation of why the Criteria of Adverse Effect were deemed inapplicable; (v) written opinions from the State Historic Preservation Officer, if available; and (vi) a cost estimate for the project, detailing any federal involvement. 

Concerns were raised about the City’s failure to provide the Advisory Council for Historic Preservation an opportunity to respond to the finding that the UDAG project would not adversely affect the historic district. The City contended that the Advisory Council's review was not necessary as HUD had delegated impact assessment responsibilities to the City, which concluded there was no impact. Residents supported the City’s assertion regarding the elimination of further Council review unless a timely objection was made by the Executive Director. However, they argued that the City did not submit the determination to the Executive Director, failed to assess effects on National Register properties under NHPA, and that the Pennsylvania Historical and Museum Commission did not adequately express its views. The District Court found that the City fulfilled its responsibilities under NHPA, making Advisory Council review unnecessary. However, the historical impact findings were criticized as erroneous, based on the City Historical Preservation Officer's belief regarding visual obstruction from the proposed construction.

Allegations of error raised by the Residents, aside from the claim of clear error regarding historical impact findings, have been waived and will not be considered. The court finds that the Residents' disagreement with the project's line of sight and its effect on the historical district does not constitute clear error. Consequently, the district court's conclusion that no additional authorization from the Advisory Council was necessary is upheld. The court affirms the district court's summary judgment in favor of the City and HUD concerning the Residents' claims under the Administrative Procedure Act (APA), National Environmental Policy Act (NEPA), and National Historic Preservation Act (NHPA). The document notes that the individual appellants are listed, and it explains that the Residents previously attempted to stop HUD from entering a new funding agreement, but their suit was dismissed due to lack of final agency action, which precluded subject matter jurisdiction. Furthermore, it details HUD's environmental review responsibilities and the factors it considers in determining whether public hearings are needed during an Environmental Impact Statement (EIS), clarifying that these factors pertain specifically to EIS hearings. The City and HUD's prior agreement to use repealed regulations as a compliance guide is mentioned, along with the Residents' significant opposition to the project, which included multiple lawsuits, appeals, protests, and public testimonies.

The intensity of the Residents' opposition alone does not establish a case or controversy without a significant interest that grants subject matter jurisdiction under Article III. However, their strong interest in the City’s UDAG application is relevant for determining standing, as the connection between the challenged action and their claimed injuries is immediate. This UDAG application is the fifth amendment to one initially approved by HUD in 1986 to fund a festival park at Penn's Landing; as it proposes a new project, the City must meet all UDAG program requirements. Previous case law (LaFlamme v. FERC, 852 F.2d 389) emphasized the necessity of considering cumulative environmental impacts from past, present, and foreseeable future projects. The Residents referenced six plans in the City's environmental assessment, which include various land use and development plans. The legal precedent indicates that the specifics of each case are critical, and the National Historic Preservation Act (NHPA) requires that federal agencies consider the effects of their undertakings on historic sites before federal funds are expended, allowing the Advisory Council on Historic Preservation to comment. However, since the Residents did not raise the NHPA compliance issue in their opening brief, it has been waived, and the court will not address it.