III. Responses to Comments

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2 A. Introduction CEQA Guidelines Section 15088(a) states that The lead agency shall evaluate comments on environmental issues received from persons who reviewed the Draft EIR and shall prepare a written response. The lead agency shall respond to comments that were received during the notice comment period and any extensions and may respond to late comments. In accordance with these requirements, this section of the Final EIR provides responses to each of the written comments received regarding the Draft EIR. Topical responses have been prepared to address commonly raised topics. These topical responses are provided in Section III.B, Topical Responses, of this section of the Final EIR and include the following: Topical Response 1: Project Objectives and Selection of Alternatives Topical Response 2: Feasibility of Preservation Alternatives Topical Response 3: Rent Stabilization Ordinance and Resident Retention Plan Topical Response 4: Relationship of Density to Environmental Impacts Topical Response 5: Open Space Topical Response 6: Summary of Traffic Impacts, Project Features, Mitigation Measures, and Area Improvements Topical Response 7: Circulation Topical Response 8: Summary of Construction Impacts A matrix providing an overview of the environmental topics raised by each commentor is provided in Table FEIR III-2 on page III-67 in Section III.C, Comments Matrix, of this section of the Final EIR. This matrix is followed by responses to each of the written comments received. Page III-1

3 B. Topical Responses 1. Project Objectives and Selection of Alternatives Several comments on the Draft EIR raise concerns regarding the adequacy of project objectives under CEQA, claiming that the project objectives are narrowly defined to favor demolition rather than preservation of the existing Wyvernwood community. These comments misconstrue the purpose of the project objectives, as defined by CEQA, and the way the objectives relate to each of the alternatives to the proposed project. This topical response provides an explanation of the requirements for the selection of project objectives under CEQA, a description of the process by which the alternatives were properly identified and analyzed under CEQA, and a summary of the findings of the Draft EIR s alternatives analysis, including the ability of the alternatives to meet the project objectives. Identification of Project Objectives CEQA Guidelines 15124(b) states that the project description shall contain a statement of the objectives sought by the proposed project. CEQA Guidelines 15124(b) further states that the statement of objectives should include the underlying purpose of the project. As stated on page II-12 of the Draft EIR, the underlying purpose of the proposed project is to create a mixed-use community featuring a substantial amount of new, upgraded, and modernized housing stock integrated with retail, office, and neighborhoodoriented uses to serve the local and regional communities, as well as considerable open space and recreational facilities, resulting in an attractive, cohesive, planned development, with no net loss of rental housing, and no involuntary displacement of existing residents. Section II, Project Description, of the Draft EIR includes the complete list of the project s specific objectives. The objectives of the project are listed within the following categories: (a) Development and Site Design Objectives; (b) Community Objectives; and (c) Economic Objectives. The Development and Site Design Objectives are further grouped into the following subcategories: (1) Housing; (2) Civic Uses and Open Space/Recreational Uses; (3) Design, Parking, and Circulation; and (4) Infrastructure and Energy Efficiency. In accordance with CEQA, the project objectives include specific goals that would enable the proposed project to achieve its underlying purpose as stated above. Page III-2

4 Some comments indicate a concern that in order to reject rehabilitation alternatives, page V-88 in Section V, Alternatives, of the Draft EIR misstates the project s objective as seeking to create substantial amount of new housing stock. The use of the word new in this context was intended to indicate additional housing as compared to new construction. Purpose of Project Objectives and Relationship to Project Alternatives The primary purpose of the project objectives is to help the Lead Agency develop a reasonable range of alternatives to evaluate in the EIR and aid the decision makers in preparing findings or a statement of overriding considerations, if necessary (CEQA Guidelines 15124(b)). As discussed in Section V, Alternatives, of the Draft EIR, the identification and analysis of alternatives to a project is a fundamental aspect of the environmental review process under CEQA. Public Resources Code (a) establishes the need to address alternatives in an EIR by stating that in addition to determining a project s significant environmental impacts and indicating potential means of mitigating or avoiding those impacts, the purpose of an environmental impact report is... to identify alternatives to the project. The CEQA Guidelines emphasize that the selection of project alternatives be based primarily on the ability to reduce impacts relative to the proposed program, even if these alternatives would impede to some degree the attainment of the project objectives, or would be more costly. The Guidelines further direct that the range of alternatives be guided by a rule of reason, such that only those alternatives necessary to permit a reasoned choice are addressed. CEQA Guidelines (a) states: An EIR shall describe a range of reasonable alternatives to the project, or to the location of the project, which would feasibly attain most of the basic objectives of the project but would avoid or substantially lessen any of the significant effects of the project, and evaluate the comparative merits of the alternatives. An EIR need not consider every conceivable alternative to a project. Rather it must consider a reasonable range of potentially feasible alternatives that will foster informed decision-making and public participation. An EIR is not required to consider alternatives, which are infeasible. The lead agency is responsible for selecting a range of project alternatives for examination and must publicly disclose its reasoning for selecting those alternatives. There is no ironclad rule governing the nature or scope of the alternatives to be discussed other than the rule of reason. In selecting project alternatives for analysis, potential alternatives must pass a test of feasibility. CEQA Guidelines (f)(1) states that: Page III-3

5 Among the factors that may be taken into account when addressing the feasibility of alternatives are site suitability, economic viability, availability of infrastructure, general plan consistency, other plans or regulatory limitations, jurisdictional boundaries, and whether the proponent can reasonably acquire, control or otherwise have access to the alternative site... It should be noted that when assessing feasibility in connection with the alternatives analysis in the EIR, the initial question is whether the alternative is potentially feasible. A number of factors that may be taken into account when addressing the feasibility of alternatives are listed in CEQA Guidelines (f)(1). Like mitigation measures, potentially feasible alternatives are suggestions which may or may not be adopted by the decisionmakers. (No Slo Transit, Inc. v. City of Long Beach (1987) 197 Cal.App.3d 241, 256, 242 Cal.Rptr. 760; accord, Native Sun/Lyon Communities v. City of Escondido (1993) 15 Cal.App.4th 892, 908, 19 Cal.Rptr.2d 344, questioned on another point in Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 698, 107 Cal.Rptr.2d 149, 23 P.3d 43.) When it comes time to decide on project approval, the public agency s decision-making body evaluates whether the alternatives are actually feasible. (Mira Mar, supra, 119 Cal.App.4th at p. 489, 14 Cal.Rptr.3d 308; Guidelines, 15091, subd. (a)(3).) As indicated above, the intent of the alternatives analysis is to reduce the significant impacts of a project. As summarized in Section VI, Other CEQA Considerations, of the Draft EIR, implementation of the project would result in significant and unavoidable shortterm construction impacts with regard to air quality (for both regional and local emissions) and noise. Implementation of the project would also result in significant and unavoidable long-term operational impacts with regard to aesthetics/visual quality (due to the removal of an identified historic resource from the project site), air quality (regional emissions only), historic resources, traffic (at six study intersections and intrusion into nearby neighborhoods (to the extent the neighborhoods are unable to reach consensus on the required mitigation plan), and solid waste generation. Based on the significant environmental impacts of the project, the objectives established for the project, input from the community, and consideration of the General Plan and zoning designations applicable to the project site, Section V, Alternatives, of the Draft EIR analyzes a total of six alternatives to the project. The analyzed alternatives include two alternatives that would preserve all of the existing on-site uses, two alternatives that would preserve portions of the existing on-site uses, and two alternatives that would remove all of the existing on-site uses. The following discussion summarizes each of the analyzed alternatives and the basis for its selection: Alternative A: No Project/No Build. The No Project/No Build Alternative assumes that the project would not be approved and no new development would Page III-4

6 occur within the project site. Thus, the physical conditions of the site would remain as they are today. None of the existing structures would be removed, and no new buildings would be constructed. This Alternative was evaluated in accordance with CEQA Guidelines (e), which required the evaluation of a No Project alternative to allow decisionmakers to compare the impacts of approving the proposed project with the impacts of not approving the proposed project. Alternative B: No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards. Under the No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative, all existing onsite uses would be retained, and extensive rehabilitation work would be conducted to improve identified substandard conditions on the project site. No new development or land uses would be introduced, and no improvements would be implemented other than those identified to address existing conditions. This Alternative was evaluated in accordance with CEQA Guidelines Section (e)(3)(B), which states that the No Project Alternative may discuss predictable actions by others, such as some other project if disapproval of the project under consideration were to occur. The No Project/Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative represents reasonably foreseeable development of the project site given the need to improve existing on-site deficiencies and the project site s value as a historic resource. Alternative C: Partial Preservation Alternative Retention of National Register Eligibility. The Partial Preservation Alternative Retention of National Register Eligibility would retain approximately 50 percent of the existing historic district on the project site and redevelop the remaining portion. This Alternative was evaluated primarily for its potential to avoid or substantially lessen the proposed project s significant impact to historic resources. The level of development was structured to represent the greatest amount of new construction that could be accommodated on the site without creating an adverse impact to aesthetics (due to the loss of an historic resource) or cultural resources (due to the loss of National Register Eligibility). Alternative D: West End Preservation Alternative 2. The West End Preservation Alternative 2 would retain a small portion of the existing Wyvernwood Historic District in the northwestern portion of the project site. This Alternative was evaluated primarily for its potential to avoid or substantially lessen the proposed project s significant impact to historic resources. Alternative E: Reduced Intensity Alternative Specific Plan Equivalent to RAS3 with Density Bonus. The Reduced Intensity Alternative Specific Plan Equivalent to RAS3 with Density Bonus would remove all existing uses from the project site and develop a reduced density version of the project that includes 2,709 residential units, which is equivalent to the residential density allowed Page III-5

7 under the City s RAS3 (Residential/Accessory) Zone on the net site area (not counting open space and streets) with a density bonus of 584 units. This Alternative was evaluated for its potential to avoid or substantially lessen the proposed project s significant impacts to air quality during construction and operation, noise during construction, traffic during operation, and solid waste during operation. Alternative F: Reduced Height Alternative. The Reduced Height Alternative would remove all existing uses from the project site and construct a development that is substantially similar to the proposed project, but with the 210-foot and 260-foot height zones that are shown in the proposed project s height district map eliminated (see Figure II-9 in Section II, Project Description, of the Draft EIR). The analysis in Section IV.A.1, Aesthetics/Visual Quality/Views, of the Draft EIR determined that impacts to visual character would be less than significant. However, the evaluation of aesthetics is inherently influenced by a degree of subjectivity, as individuals respond differently to changes in the visual environment. To reflect the potential for differences of opinion as to aesthetic impacts, the Reduced Height Alternative was evaluated. Findings of the Draft EIR Alternatives Analysis In order to foster informed decisionmaking, the analysis in Section V, Alternatives, of the Draft EIR, evaluates each alternative based on its: (1) ability to substantially reduce significant environmental impacts, (2) ability to attain most of the basic project objectives, and (3) feasibility. The Draft EIR determined that Alternative A (No Project/No Build), which is required to be analyzed by CEQA, would avoid all of the proposed project s significant environmental impacts except for the potential future impact to historic resources, which would be less than the project s, but which could result in the deterioration of the on-site historic resources over time. However, the No Project/No Build Alternative would not attain any of the project objectives. Furthermore, the No Project/No Build Alternative would not address any of the existing problems and deficiencies that pose substantial challenges to the continued use of the project site. See pages V-27 through V-30 in Section V, Alternatives, of the Draft EIR. The Draft EIR found that while Alternative B (No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative) and Alternative C (Partial Preservation Alternative Retention of National Register Eligibility) would avoid the proposed project s significant impact to historic resources, as well as other impacts, both alternatives: (1) would not attain the majority of the project objectives, including the objective to remove existing on-site buildings and improvements that currently encroach upon public easements for water and storm drain utilities; and (2) would not be financially Page III-6

8 feasible to implement. See pages V-54 through V-58 and pages V-88 through V-93 in Section V, Alternatives, of the Draft EIR. The basis for this conclusion is also discussed in detail in Topical Response No. 2, Feasibility of Preservation Alternatives. The Draft EIR found that Alternative D (West End Preservation Alternative 2) would achieve most of the project objectives that support the project s underlying purpose, albeit to a lesser extent than the proposed project. While the West End Preservation Alternative 2 would fully or partially achieve most of the project objectives, it would not avoid any of the project s significant environmental impacts, although the project s impacts to historic resources, traffic, and solid waste would be reduced. This Alternative would also result in a new significant and unavoidable impact with respect to housing displacement, as well as greater impacts to aesthetics/visual quality. As discussed on page V-98 in Section V, Alternatives, of the Draft EIR, the abrupt transition between the preserved portion and the new development would create a sense of visual contrast and incompatibility that would result in greater impacts to visual character and quality than under the proposed project. While impacts related to historic resources would be reduced as compared to the proposed project, the West End Preservation Alternative 2 would not avoid the project s significant adverse impact to historic resources. As historic resources are also considered visual resources by the City for purposes of CEQA, this Alternative also would not avoid the project s significant impact to visual resources. Thus, not only would the West End Preservation Alternative 2 incur the project s significant impact to visual resources, but it also would result in greater impacts with regard to visual quality and character due to the juxtaposition of two dissimilar development components. See Topical Response No. 3 concerning the general applicability of the City s Rent Stabilization Ordinance and a discussion of the Resident Retention Plan. Furthermore, the Financial Feasibility Report that was prepared for the project Alternatives (included in Appendix N.2 to the Draft EIR) determined that the cost of implementing the West End Preservation Alternative 2 would not be financially feasible to implement. See pages V-120 through V-123 in Section V, Alternatives, of the Draft EIR. See also Topical Response No. 2, Feasibility of Preservation Alternatives. The Draft EIR found that Alternative E (the Reduced Intensity Alternative Specific Plan Equivalent to RAS3 with Density Bonus) would meet the proposed project s underlying purpose and it would fully or partially achieve the majority of the project objectives that support this underlying purpose, albeit to a lesser extent than the proposed project. The Reduced Intensity Alternative Specific Plan Equivalent to RAS3 with Density Bonus would likely avoid the project s regionally significant operational air quality impact for CO, but would not avoid the regionally significant operational emissions for other pollutants. Additionally, this Alternative would not avoid the project s other significant environmental impacts, although the project s impacts to air quality (during operation), traffic, and solid waste would be reduced. This Alternative would also result in a new significant and Page III-7

9 unavoidable impact related to housing displacement since this Alternative would accommodate a phasing plan that allows current tenants to be temporarily relocated on-site during construction, and there are insufficient new affordable units to permanently accommodate the current tenants in the new development once complete. See Topical Response No. 3 concerning the general applicability of the City s Rent Stabilization Ordinance and a discussion of the Resident Retention Plan. Furthermore, the Financial Feasibility Report that was prepared for the project Alternatives (included in Appendix N.2 to the Draft EIR) determined that the cost of implementing the West End Preservation Alternative 2 would not be financially feasible to implement. See pages V-148 through V-151 in Section V, Alternatives, of the Draft EIR. The Draft EIR found that Alternative F (Reduced Height Alternative) would achieve all of the project objectives that support this underlying purpose to the same extent as the project, with one exception. The Reduced Height Alternative would not meet the proposed project s objective to introduce new building heights in order to create opportunities for scenic long-range views (e.g., of downtown Los Angeles and distant mountain ranges). This objective would be achieved to a lesser extent under the Reduced Height Alternative due to the elimination of the high-rise zones, which would result in fewer new building heights. While the Reduced Height Alternative would not avoid or substantially lessen any of the project s significant and unavoidable impacts, it would not worsen any of the project s environmental impacts or result in new significant impacts. In terms of feasibility, the Reduced Height Alternative is considered feasible to implement. See page V-172 in Section V, Alternatives, of the Draft EIR. Conclusions As discussed above, the project objectives were appropriately stated in Section II, Project Description, of the Draft EIR, in accordance with CEQA Guidelines 15124(b). The alternatives analyzed in Section V, Alternatives, of the Draft EIR, were appropriately selected and analyzed in accordance with CEQA Guidelines (e)(3)(B) and CEQA Guidelines (c). Of the four preservation alternatives considered, the Draft EIR found that: Both of the full preservation alternatives and one of the partial preservation alternatives would fail to attain the majority of the project objectives, including the objective to remove existing on-site buildings and improvements that currently encroach upon public easements for water and storm drain utilities (see Topical Response No. 2); and All of the preservation alternatives would be financially infeasible for the Applicant to implement. Page III-8

10 The selected alternatives highlight the environmental and policy trade-off between the project objectives and impacts of the project. Because the project involves demolition of an historic resource, preservation alternatives were reviewed to determine whether there was an alternative that could eliminate or reduce impacts to historic resources. However, one of the key objectives of the project is that it be implemented with no involuntary displacement of existing tenants. The analysis determined that alternatives capable of reducing preservation impacts would also require that rents be increased for those units to recover the investment in the preservation development cost, and would reduce the number of new affordable units. Even assuming that somehow the rents could be increased above 10 percent for a renovation project notwithstanding the applicable RSO provisions, because the existing tenants cannot afford significant rent increases, the passing of the renovation costs to tenants would essentially cause their economic displacement. Taken together, these results would conflict with the project s no displacement objective. A basic premise underlying the project is that there would be an increase in permitted density so that the market rate units create sufficient value to allow as many units as are necessary to accommodate existing tenants who choose to remain on-site (at a rent no greater than they would have paid in their existing unit) and to allow for 15 percent of the total number of units to be set aside for rent by very low- and low-income households, while still permitting the Applicant to earn a market-responsive return on its investment to develop the project. The alternative analysis, therefore, focuses on whether there are feasible alternatives to the project that could achieve the articulated objectives of the project, including accommodating existing tenants who choose to remain on-site, while also avoiding the identified significant environmental impacts of the project. Thus, the Alternatives analysis clearly shows that demolition is necessary in order to construct a financially feasible project while meeting the majority of the project objectives. Page III-9

11 B. Topical Responses 2. Feasibility of Preservation Alternatives This topical response addresses comments related to the sufficiency of the analysis of the preservation alternatives and questions regarding the Draft EIR s conclusion that the preservation alternatives are infeasible, within the meaning of CEQA. As discussed in Section V, Alternatives, of the Draft EIR, under CEQA Guidelines (f)(1), [a]mong the factors that may be taken into account when addressing the feasibility of alternatives are site suitability, economic viability, availability of infrastructure, general plan consistency, other plans or regulatory limitations. (emphasis added) The degree to which the project alternatives are feasible is discussed in detail in Section V, Alternatives, of the Draft EIR and in the Financial Feasibility Report, which was prepared for the project alternatives and is included as Appendix N.2 to the Draft EIR. The issue of whether historic preservation and rehabilitation can be implemented on a phased basis and without displacement of existing residents is covered in Topical Response No. 3, which discusses the general applicability of the City s Rent Stabilization Ordinance (RSO) and the Resident Retention Plan. This topical response specifically addresses the feasibility of a partial or full historic preservation alternative. Comments stated that: (1) the alternatives analysis lacked sufficient rationale for rejecting Alternative B (the No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative) and Alternative C (the Partial Preservation Alternative Retention of National Register Eligibility) as infeasible because the $124,146 per-unit rehabilitation cost assumed in the financial feasibility analysis of project alternatives was more than two times the $53,000 per-unit cost for historic rehabilitation of a similar sized garden apartment complex at the Lincoln Place Apartments; (2) the project objectives had been misstated to require that the project consist of new housing stock as compared to rehabilitated units; (3) site improvements, such as enhanced emergency access, could be achieved by adding new signage, lighting, and widening existing pathways, as compared to demolishing and replacing the historic resources; (4) there is no need to eliminate the infrastructure conflicts, as stated throughout the Draft EIR, and no easements and encroachments or illustrations of the encroachments have been included in the Draft EIR, so the encroachments cannot be included as a factor in determining the feasibility of the preservation alternatives (or conversely, that a preservation alternative that eliminated the infrastructure conflict should have been considered); (5) [m]ore housing and civic amenities could be incorporated in residential towers greater than the 7-story buildings Page III-10

12 proposed in the partial preservation alternative, particularly along Olympic Boulevard or with other infill construction replacing surface parking lots currently on the site; (6) other projects, such as the Lincoln Place Apartments in Venice, California, the Mayfair Mansions Apartments in Washington, DC, the Colonial Village Apartments in Arlington, Virginia, and Village Green near Baldwin Hills, California offer evidence that rehabilitation is feasible; and (7) an economic analysis within a Draft EIR is not considered paramount under CEQA. In addition, an architectural studio class at Cal Poly Pomona prepared designs for several other alternatives that retained at least 50 percent of the existing Wyvernwood historic district. The Project Objectives Do Not Assume New Construction Some comments contend that in order to reject rehabilitation alternatives (see page V-88 of Section V, Alternatives, of the Draft EIR), the analysis of the alternatives misstates the project s objective to create a substantial amount of new housing stock (emphasis in the original Comment No ). The use of the word new in this context was intended to indicate additional housing as compared to new construction. The quoted phrase included in this and similar comments was taken out of the context of a discussion of the ability of the partial preservation option to meet the project objective to have an attractive, cohesive, planned development. Page V-88 of the Draft EIR states that in order to protect the historic integrity of the rehabilitated district, the preservation component of the project would be visually separate and independent from the new construction. Accordingly, the resulting urban form of the development under the Partial Preservation Alternative Retention of National Register Eligibility would not be as cohesive as the proposed project. On page V-89 of the Draft EIR, the project s objectives with respect to increasing the amount and quality of housing stock and providing a variety of housing types, including rental and ownership, is discussed. As discussed therein, the Partial Preservation Alternative Retention of National Register Eligibility would only partially achieve the project s objectives to: substantially increase the amount and quality of the housing stock and provide a variety of housing types, sizes, and styles, including both rental and ownership units, to help accommodate the range of housing needs within the City and the region; create housing stock in compliance with current building and safety codes and requirements; and alleviate overcrowded conditions that currently exist on-site. The Draft EIR concludes that the Partial Preservation Alternative Retention of National Register Eligibility does not achieve these objectives as compared to the project due to the reduced amount of new housing and the fact that this alternative would result in the displacement of the current residents. It is clear from the discussion that the use of the phrase new housing is intended to refer to an increase in the overall amount of housing and is not a prejudgment that any housing should be new as compared to rehabilitated. Page III-11

13 Infrastructure Conflicts Impede the Feasibility of Rehabilitation III. Responses to Comments With respect to the comments regarding the encroachments caused by the Metropolitan Water District (MWD) and easements, the encroachments are discussed on page IV.L-25 of Section IV.L.1, Utilities and Service Systems Water Supply, of the Draft EIR and pages V-7 and V-30 of Section V, Alternatives, of the Draft EIR. Appendix FEIR-2 of this Final EIR shows the extent of the encroachments and the impacted structures and documents the locations of the easements, which have as many as 35 buildings on top of them. Even assuming that MWD and/or the would agree to permit extensive rehabilitation of the buildings encroaching into the easements, it would be extremely difficult to secure financing for those improvements given that the holder of the easement (i.e., MWD and/or the City) could enforce the right to demolish the structure in the event the holder needed to access the underlying improvements. Over time, the pipelines and storm drains in the encroaching easements would become older and could require on-going maintenance. Therefore, the risk that those easements would need to be accessed increases over time, and makes the project financing even more difficult. Moreover, lenders typically require assurances that any financed improvements can be rebuilt in the case of casualty. If any encroaching units were lost to a casualty, or required to be removed to effectuate repairs, there is no evidence that permits would be issued for improvements that are in conflict with major utility easements, further impeding the ability to finance rehabilitation improvements. Lastly, from a policy standpoint, standard practice is to locate major infrastructure in open space or right-of-way to maximize access, increase the ease of maintenance and repairs, and avoid disruption to residents who live in the encroaching units. Avoiding conflicts with infrastructure is a policy consideration that supports a finding of infeasibility. Courts have noted that the concept of feasibility under CEQA encompasses desirability to the extent that desirability is based on a reasonable balancing of the relevant economic, environmental, social and technological factors, and an alternative that is impractical or undesirable from a policy standpoint may be rejected as infeasible. (California Native Plant Society v. City of Santa Cruz (2009) 177 Cal.App.4th 957, at 1001.) The commenters have offered no substantiation to suggest that either financing would be available or that the holders of the easements would willingly relinquish their rights, which would be required to allow the significant investment in the rehabilitation construction with respect to encroaching structures. In addition, there were no materials offered by the commenters to suggest why perpetuating the existing infrastructure conflicts would be desirable from the perspective of the utility providers. Page III-12

14 The Lead Agency is Obligated under CEQA to Assess the Actual Feasibility of Project Alternatives Contrary to assertions in the comments that a financial analysis under CEQA is not relevant, in making a decision about whether to approve the project, a decision making body must evaluate whether the alternatives are actually feasible (California Native Plant Society v. City of Santa Cruz (2009) 177 Cal.App.4th 957, at 999, emphasis in the original). A determination of infeasibility may be based upon economic, legal, social, technological, or other considerations. Thus, a financial analysis is critical to the decisionmaker s actions. To provide adequate information regarding the economic feasibility of the selected alternatives, the Financial Feasibility Report was prepared for the project alternatives and is included as Appendix N.2 of the Draft EIR. As indicated in Section V, Alternatives, of the Draft EIR, the Financial Feasibility Report concluded that neither the No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative nor the Partial Preservation Alternative Retention of National Register Eligibility is feasible on a financial basis (see pages V-57 to V-58 and V-92 in Section V, Alternatives, of the Draft EIR, respectively). Even Assuming the Same Per-Unit Rehabilitation Costs as the Lincoln Place Apartments, the Preservation Alternatives are Financially Infeasible Commenters point out that the rehabilitation costs used on a per-unit basis for the proposed project are more than two times those assumed for the Lincoln Place Apartments based upon materials submitted with respect to a Mills Act contract for the Lincoln Place Apartments in Venice for the Cultural Heritage Commission hearing on October 6, As indicated in the comments and confirmed in the Mills Act staff report, the per-unit cost for the Lincoln Place Apartments was approximately $53,000 for minimally rehabilitated units and $70,763 for more extensively renovated units including Americans with Disability Act upgrades and modernized kitchens. These figures are compared in some comments with the $124,146 per-unit construction cost estimated for historic preservation rehabilitation in the project alternatives. It should be noted that median home prices and median rents are both lower in the Boyle Heights Area than in the Subregion as a whole. Specifically, as shown in Table IV.I-12 on page IV.I-33 in Section IV.I.2, Housing, of the Draft EIR, the median monthly rent in the Boyle Heights Area in 2000 was $576, while the median monthly rent in the Subregion in 2000 was $656. Page III-13

15 It is difficult to understand from the comments and from the Mills Act contract document referenced above, which was independently obtained by the Applicant, but was not included with the comments, whether the costs provided in the comments represent an apples to apples comparison without knowing more about the nature of the rehabilitation at the Lincoln Place Apartments. For example, the historic preservation construction cost estimates used in the Draft EIR analysis, which were prepared by the BenchMark Contractors Inc./Morley Builders construction company ( BenchMark ), include approximately $22,400 per unit for both exterior and interior structural upgrades and their respective architectural costs. The mechanical, electrical and plumbing scope for the project alternatives also assumes that all existing mechanical, plumbing and electrical systems would be removed and reinstalled with new plumbing lines, mechanical ductwork, electrical distributions and fixtures. However, the cost estimate included in the Lincoln Place Mills Act documentation shows that no structural upgrades were included and the plumbing and electrical work appears to be limited. In many cases, the cost included in the Lincoln Place Apartments Mills Act documentation is based upon an allowance for an estimated percentage of units requiring repair, as compared to the BenchMark estimates, which assume all units receive complete rehabilitation. One of the objectives of the project is to upgrade and modernize the available housing stock on-site by allowing for upgraded sewer, electrical, and telecommunications systems, as well as updated building materials, floor plans, and amenities to respond to the requirements of modern lifestyles and improve efficiency. Without knowing more about the physical condition of the existing structures, the suggestions of commenters that upgrades could occur without the installation of new mechanical, plumbing and electrical systems would be similar to Alternative A (No Project/No Build) analyzed in Section V, Alternatives, of the Draft EIR. As discussed therein, the No Project/No Build Alternative assumes that the project would not be approved and no new development would occur within the project site. General on-going maintenance would continue to occur consistent with current operations. However, no new floor area would be constructed, the existing deficiencies onsite that result from the existing site design and configuration would not be addressed, and no improvements would be made to the existing open space or pedestrian and vehicular circulation systems. Without knowing more about the physical condition of Lincoln Place as compared to existing conditions at Wyvernwood, it is impossible to make a determination as to why any specific construction costs at the Lincoln Place Apartments may be lower than those estimated for rehabilitation of the Wyvernwood units. One of the guiding principles in specifying the alternatives was to define a post-rehabilitation finished product that would be comparable in quality and amenities to the new construction proposed under the project, so that the alternative would meet the project s objectives to the maximum extent possible (i.e., to render the alternative in its most favorable, but reasonable, light). Page III-14

16 However, to address the comments stating that the construction costs were unreasonably high, the feasibility model was re-run assuming, arguendo: (1) the construction costs reported for the Lincoln Place Apartments, and (2) that the rehabilitated project complies with the limitation on rent increases imposed under RSO (i.e., generally, the rent following rehabilitation cannot exceed 10 percent of the pre-rehabilitation rent, as discussed in Topical Response No. 3). The results are presented in a supplementary letter included as Appendix FEIR-5 of this Final EIR from HR&A Advisors, Inc. (HR&A), which prepared the Financial Feasibility Report for the project alternatives that is included as Appendix N.2 of the Draft EIR. In preparing that analysis (including review of the Mills Act contract documentation for the Lincoln Place Apartments, as noted above), HR&A found that the $53,000 per-unit historic preservation construction value mentioned in the comments needed to be adjusted to $43,786 because the Lincoln Place Apartments figures included site work, whereas the Wyvernwood rehabilitation figures prepared by BenchMark did not. The analysis demonstrates that even using the lower Lincoln Place Apartments rehabilitation construction cost value per unit, the resulting gross margin metric for the alternative as a whole is insufficient to meet the threshold of financial feasibility (i.e., 0.22 percent versus the minimum acceptable threshold of 8.0 percent). Even if the 10 percent limit on rent increases allowed by the RSO could be overridden, the rent level that would allow the project (even with the reduced estimate of rehabilitation costs) to be feasible would need to be in the range of $2,700 per month, which is well beyond the overall weighted average rent at the project site today (i.e., $936 per month) and well above market rate rents for the Boyle Heights area ($1,734 per month), even after adjustments for inflation over time to the first post-rehabilitation year of occupancy. Market rents in the Lincoln Place neighborhood are considerably higher than rents in the Boyle Heights neighborhood. Therefore, the total money available to repay the rehabilitation costs is greater for the Lincoln Place Apartments project compared to the proposed project. Moreover, it should be noted that the Lincoln Place Apartments project received an exemption from rent stabilization, which allowed the base rent postrehabilitation to be set by the owner to market levels. Also, at the time rehabilitation took place, and unlike Wyvernwood, the units subject to the RSO were more than 90 percent vacant, 1 so there was no need to pay relocation cost and no need to accommodate displaced tenants on the site. In contrast, the proposed project provides an explicit mechanism and a set of binding commitments for all existing tenants who want to remain at Wyvernwood to be accommodated with both temporary and permanent on-site housing at rents no higher than would have been payable under the RSO, as described in the Resident Retention Plan included as Appendix J.4 to the Draft EIR. 1 Lincoln Place Apartments Property Class Regulation, Adopted by the Rent Adjustment Commission 2/4/10. See Appendix FEIR-6 of this Final EIR. Page III-15

17 In specifying the alternatives for analysis, historic rehabilitation construction was assumed to be undertaken in one phase in all alternatives to achieve reasonable construction cost efficiencies. As indicated above, even assuming construction costs that are equivalent to what has reportedly been achieved at the Lincoln Place Apartments (where there was no need to phase the rehabilitation because the units were 90 percent vacant), financial feasibility modeling still shows that rehabilitation does not achieve minimum threshold returns. Based upon communications from BenchMark, phasing the rehabilitation construction increases construction costs, so it can be assumed that if the rehabilitation were to be phased, the costs would not be less than what were assumed at the Lincoln Place Apartments. Therefore, even assuming phased rehabilitation and construction costs similar to the Lincoln Place Apartments, the rehabilitation and partial rehabilitation options for Wyvernwood are not financially feasible. As discussed in the supplementary letter included as Appendix FEIR-5, the results of the financial feasibility model that was re-run show that by using the lower adjusted Lincoln Place per-unit cost for the rehabbed units, and the associated limits on rents for those units if these costs were to be recovered under the RSO, this alternative would still be financially infeasible. This is because the results do not meet the minimum acceptable feasibility thresholds for both gross margin and Internal Rate of Return, as presented in Appendix N.2 of the Draft EIR. As discussed in Section V, Alternatives, of the Draft EIR, partial rehabilitation consists of repairing damaged facilities and meeting contemporary living standards. Specifically, building improvements would include: repair of cracked and damaged entry stairs, slabs, and exterior wall cladding; new electrical wiring; removal of water heaters from closets; and the remodeling of kitchens and bathrooms including plumbing upgrades. Landscaping improvements would include the repair of damaged footpaths and stairs, tree stumps, significant erosion, dead or dying landscape areas, and non-functioning drainage areas. The existing parking facilities would also be improved, although it would not be possible to add the number of additional parking spaces required to fully satisfy the parking demand associated with the retained units. Considering Additional Preservation Alternatives or Adding Additional Civic and Commercial Uses Does not Alter the Conclusions Regarding Feasibility The proposed alternatives prepared by the Cal Poly student class demonstrate urban design variants of Alternative C (the Partial Preservation Alternative Retention of National Register Eligibility), namely a partial preservation option where new construction is added and approximately 50 percent (or more) of the existing historic district is demolished. As shown in Table V-1 on page V-4 in Section V, Alternatives, of the Draft EIR, the Partial Preservation Alternative Retention of National Register Eligibility would preserve 648 existing units and construct 1,710 new residential units for a total of 2,358 dwelling units upon build-out. Comments suggested that additional development could be accommodated in a preservation alternative. However, in each of the student designs, the total number of new units is less than what was considered in the Partial Preservation Page III-16

18 Alternative Retention of National Register Eligibility analysis in Section V, Alternatives, of the Draft EIR. One student submission preserves 648 units, demolishes 539 units, and constructs 1,200 units for a total of 1,848 units; another submission preserves 849 units, demolishes 338 units, and constructs 695 units, for a total of 1,544 units; another submission featured infill development, senior homes, senior center, etc. for an overall preservation of 75 percent of the existing units, without a specific breakdown of the number of total units; and another submission preserves 603 units, demolishes 584 units, and constructs 1,183 units for a total of 1,786 units. To the extent the student-generated alternatives create less housing than what was analyzed in the Partial Preservation Alternative Retention of National Register Eligibility, it is clear from the results of the Financial Feasibility Report included as Appendix N.2 of the Draft EIR that these alternatives would not be financially feasible, because there would be an insufficient number of new market rate units and commercial space in the Cal Poly student class variants of Alternative C (the Partial Preservation Alternative Retention of National Register Eligibility) to generate the financial value that would be required to offset the cost of historic rehabilitation. The student submissions provide alternative land use plans for the incorporation of new development, but they were not accompanied by any economic analysis of the feasibility of the proposed revised designs. The Partial Preservation Alternative Retention of National Register Eligibility was designed to maximize both the potential feasibility of the alternative and the alternative s ability to meet the fundamental project objectives. In specifying the alternatives to be analyzed in the Draft EIR, the Historic Resources Group (HRG), a recognized expert in historic preservation, was asked to determine the amount of area and number of buildings that could be demolished while still maintaining the project s integrity as a historic district. HRG also determined how much new construction could be added while still allowing the district to comply with the Secretary of Interior s Standards for Rehabilitation of Historic Structures. The assertion of some comments that additional, new development could be added in excess of seven stories is contrary to the expert determinations of HRG. As discussed on page 16 of the Historic Resources Impact Analysis included as Appendix N.1 of the Draft EIR, the implementation of new development adjacent to the existing historic district could potentially have an adverse effect on the remaining historic district. To avoid adverse impacts, which is necessary to maintain the eligibility of the historic district that includes the central core, a buffer area equal to the width of Glenn Avenue would be needed between the remaining district and any new construction. The height of new buildings bordering the buffer zone would need to be stepped down so that the pedestrians standing at the edge of the remaining historic area would perceive adjacent new buildings to be no more than twice the height of the existing Wyvernwood buildings. Thus, design concepts or alternatives which would permit heights in excess of these limits Page III-17

19 would be inconsistent with the purpose of the selected historic preservation alternatives, whose primary goal was to avoid or eliminate the project impact to historic resources. Moreover, increases in height beyond seven stories would only increase construction costs without increasing revenues, further reducing financial feasibility. To the extent the comments suggest that there needs to be a broader range of preservation alternatives considered in the Draft EIR, it should be noted that the No Project/Site Rehabilitation in Compliance with Secretary of the Interior s Standards Alternative and the Partial Preservation Alternative Retention of National Register Eligibility were created as bookends to determine the overall feasibility of a rehabilitation consistent with the goals of preservation. The Partial Preservation Alternative Retention of National Register Eligibility saves and rehabilitates the minimum amount of existing area and buildings to permit Wyvernwood to retain its designation as an historic district. The amount of new construction under this alternative is maximized to add significant new revenue sources and consider the application of historic preservation tax credits and the Mills Act property tax reduction, as stated on page V-60 in Section V, Alternatives, of the Draft EIR. The new development assumed in the alternatives is primarily residential in nature to be consistent with the project s goal of upgrading existing housing and creating substantial additional housing, including covenanted affordable housing. To the extent that additional commercial uses were assumed to be part of new development, it would of necessity reduce the number of affordable units and overall housing units, thereby making this alternative less likely to conform with the project s objectives. The Feasibility of Preservation at Other Garden Apartment Complexes Does not Demonstrate the Feasibility of Preservation for the Project Alternatives The fact that other projects with characteristics generally similar to Wyvernwood may have been able to achieve successful rehabilitations does not provide substantial evidence that the same results would be applicable to the proposed project. Based upon the limited information cited by commenters about other rehabilitation projects, it is not clear whether government support was involved, whether the projects were vacant at the time the rehabilitation was undertaken, whether the results generated a market-responsive return to their investors, or any other of the multiple factors that would go into determining specific feasibility in this case. Page III-18

20 The Mills Act application for the Lincoln Place Apartments indicates that the project was at least 90 percent vacant at the time rehabilitation work began. 2 Accordingly, the project developer did not have to budget for significant relocation assistance costs for tenants of the project as required by A of the RSO. Moreover, the project developer was not limited by RSO A to the maximum 10 percent increase in what it could charge for the majority of the rehabilitated units following rehabilitation and was expressly authorized to increase rents to market rates on an accelerated basis. Market rents at the Lincoln Place Apartments are significantly higher than at Wyvernwood. Unlike the Lincoln Place Apartments, which was more than 90 percent vacant, 3 Wyvernwood is nearly fully occupied and cannot easily accommodate all tenants who want to remain onsite. See Topical Response No. 3 concerning the general applicability of the City s RSO and a discussion of the Resident Retention Plan. The Mayfair Mansions Apartments project, which is mentioned in some comments, is also inapposite to Wyvernwood, because its financing structure was supported by heavy local and federal government subsidies. 4 In particular, the Mayfair Mansions Apartments project relied on substantial backing from long-term subsidies from the Washington D.C. Department of Housing. In addition, the Mayfair Mansions Apartments project was envisioned as a condominium development and was supported by a $24.4 million loan from Washington D.C. s Housing Production Trust Fund, plus bond financing from the D.C. Housing Finance Agency. 5 These or other similar financial incentives are not available to the developers of the proposed project. It is also unclear from generally available documentation whether the Mayfair Mansions Apartments project resulted in the displacement of existing tenants. The Colonial Village Apartments project, which is also mentioned in some comments, is not supportive to the commenters case because it provided a lesser commitment to affordable housing than the proposed project. When Mobil Land Development Corporation purchased Colonial Village in 1979, it committed to Arlington County that 100 units (10 percent of the total units) would not be renovated and thereby Lincoln Place Apartments Property Class Regulation, Adopted by the Rent Adjustment Commission 2/4/10. See Appendix FEIR-6 of this Final EIR. Ibid. The Washington Post [Washington D.C.] October 2, 2008, Every Edition, Extras: DZ02. See Appendix FEIR-7 of this Final EIR. DHCD and Partners Earn Award for Affordable Housing Project. State News Service [Washington, D.C.] 4 June See Appendix FEIR-7 of this Final EIR. Page III-19