                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-17-2000

Society Hill Towers Owners' Assn. v. Rendell
Precedential or Non-Precedential:

Docket 98-1937




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Filed April 17, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-1937

SOCIETY HILL TOWERS OWNERS' ASSOCIATION,
ROBERT D. GREENBAUM; ZOE COULSON;
JOHN Q. LAWSON; JEREMY SIEGEL;
PENELOPE H. BATCHELER; GRAY SMITH;
ROXANNE GALEOTA,

       Appellants

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

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 96-cv-04778)
District Judge: Honorable Eduardo C. Robreno

Argued: March 2, 1999

Before: ALITO, McKEE, Circuit Judges, and
SCHWARTZ, Senior District Judge*

(Filed: April 17, 2000)



_________________________________________________________________
* The Honorable Murray M. Schwartz, Senior District Judge of the United
States District Court for the District of Delaware, sitting by
designation.
       M. Melvin Shralow, Esq. (Argued)
       White & Williams
       One Liberty Place
       Suite 1800
       Philadelphia, PA 19103

        Attorney for Appellants

       Steven A. Arbittier, Esq. (Argued)
       Ballard, Spahr, Andrews & Ingersoll
       1735 Market Street
       51st Floor
       Philadelphia, PA 19103

        Attorney for Appellees
       Edward G. Rendell, Mayor of the
       City of Philadelphia and The City
       of Philadelphia

       Margaret L. Hutchinson, Esq.
       Office of United States Attorney
       615 Chestnut Street
       Philadelphia, PA 19106

        Attorney for Appellees
       Secretary Of Housing & Urban
       Development and United States
       Department of Housing And Urban
       Development

OPINION OF THE COURT

McKEE, Circuit Judge.

Society Hill Towers Owners' Association and seven named
individuals1 (collectively the"Residents") appeal from the
district court's grant of summary judgment in favor of the
City of Philadelphia and former Mayor, Edward G. Rendell
(collectively "the City"); and the United States Department
of Housing and Urban Development and its Secretary,
_________________________________________________________________

1. Individual appellants are Robert D. Greenbaum, Zoe Coulson, John Q.
Lawson, Jeremy Siegel, Penelope H. Batcheler, Gray Smith, and Roxanne
Galeota.

                                  2
Andrew M. Cuomo (collectively "HUD"). The Residents
brought this suit under the Administrative Procedures Act
("APA"), 5 U.S.C. SS701 et seq., the National Historic
Preservation Act ("NHPA"), 16 U.S.C. S 470f, and the
National Environmental Policy Act ("NEPA"), 42 U.S.C.
S 4321. The Residents claimed that the City had not
properly performed the environmental and historic reviews
required under NEPA and NHPA prior to HUD's approval of
an Urban Development Action Grant ("UDAG"), and that the
City had not provided meaningful public hearings as
required under 24 C.F.R. S 570.463(a) prior to submitting
its fifth amendment to its previously submitted application
under the UDAG program. For the reasons that follow, we
will affirm.

I. Background

This dispute arose out of HUD's approval of a
$10,000,000 grant application that the City had previously
submitted to HUD to partially fund construction of a hotel
and parking garage in the Penn's Landing area of
Philadelphia. The factual background of this protracted
dispute is detailed in the district court's comprehensive
opinion. See Society Hill Towers Owners' Assn. v. Rendell,
20 F. Supp. 2d 855 (E.D. Pa. 1998). Therefore, we will only
briefly summarize the factual and procedural history of this
dispute insofar as it is helpful to our discussion.

In 1986, the City filed an application with HUD for a
$10,000,000 UDAG grant to partially fund a portion of a
festival park that the City intended to build at Penn's
Landing. The UDAG Program was created by a 1977
amendment to Title I of the Housing and Community
Development Act of 1974 ("HCDA"). 42 U. S. C.S 5301 et
seq. "The purpose of the UDAG Program is to`stimulate
economic development activity needed to aid in economic
recovery of cities and urban areas which are experiencing
severe economic distress,' by allowing such cities and
counties to apply to HUD and compete for grants intended
to stimulate private economic development." 20 F. Supp.2d
at 863 (citing 42 U. S. C. S 5318). The application received
preliminary approval from HUD, and HUD and the City
executed a grant agreement later that same year.

                               3
Thereafter, the City submitted four amendments to the
original application -- each of which was approved by HUD
-- and the grant agreement was amended each time to
correspond to the changes made by each amendment.
However, the festival park was never constructed and the
federal funds that would have been awarded under the
UDAG program for that project were never dispersed.

In September 1994, the City submitted a fifth
amendment to the 1986 UDAG application. That
amendment abandoned the concept of a festival park, and
proposed that the grant proceeds be used "solely for the
construction of a 350-room hotel and 500-vehicle garage.
This request for a fifth amendment constituted a`whole
new project' separate and distinct from the festival park
proposed in the original plan and in the previous approved
amendments." Id. at 859. HUD eventually approved the
requested fifth amendment in November, 1994. However, as
a condition of that approval, HUD required the City to hold
public hearings as required under the applicable
regulations. Accordingly, the City published a notice of
public hearings and, on November 21, 1994, two such
hearings were held. Only thirteen people attended those
hearings. Thereafter, the City notified HUD that the City
had complied with the mandate for public hearings.
However, a group of local residents who lived in the area of
the proposed hotel-parking garage (some of whom are
plaintiffs in this case) learned of the project after the
November hearings were held, and they began contacting
the City and HUD to register their opposition to the
proposed project.2

On August 6, 1996, and August 15, 1996, after
publishing notice of hearings, the City held additional
hearings on the hotel-garage project. Unlike thefirst
hearings, the August hearings were well attended, and the
_________________________________________________________________

2. The residents eventually filed suit in district court to stop HUD from
entering into a new agreement for dispersal of funds under the fifth
amendment, but that suit was subsequently dismissed without prejudice
because HUD had not approved the City's request. Accordingly, there
was no final agency action, and therefore the district court did not have
subject matter jurisdiction.

                               4
neighbors who attended expressed intense opposition to the
project. However, despite the intense and vociferous
opposition that was expressed at those hearings, the City
published a Finding Of No Significant Impact ("FONSI") and
a Notice of Intent/Request for Release of Funds
("NOI/RROF ") under the fifth amendment to its UDAG
application. "On October 23, 1996, HUD informed the City
that the requested fifth amendment was still defective, and
`suggested' . . . that the request . . . be withdrawn and not
resubmitted until the City complied with all regulatory
requirements." Id. at 860. Thereafter, following publication
of a second FONSI and NOI/RROF, additional public
comments, and additional environmental certifications, the
City did withdraw its request for a fifth amendment.
However,

       [o]n that same day, the City submitted a revised
       request for a fifth amendment. The revised request
       described physically the same project as was described
       in the request for a fifth amendment, i.e. a 350-room
       hotel and 500-vehicle parking garage. While the project
       was substantively the same, the developer and
       financing arrangements were different. Together with
       the revised request for a fifth amendment, the City also
       submitted to HUD the environmental review record
       ("ERR").

Id. (internal citations omitted). HUD approved the City's
revised request even though it was virtually identical to the
request that HUD had asked the City to withdraw.
Thereafter, on July 24, 1997, the Residents filed the instant
suit seeking declaratory and injunctive relief. The Residents
contended that the City had not afforded a meaningful
opportunity for public comment on the project, and that the
City had not properly conducted the necessary
environmental and historic reviews. The Residents sought
to enjoin UDAG funding until the City prepared an
environmental impact statement ("EIS") to address the
alleged deficiencies in the City's amended grant application.
The Residents also sought to have the district court declare
that the City had failed to conduct meaningful public
hearings and had failed to properly assess the
environmental impact of the project, including the impact

                               5
upon the affected historical district of the city. The
Residents also sought to enjoin HUD and the City from
executing the UDAG agreement until "all environmental and
historical reviews mandated by the applicable statutes and
regulations have been properly conducted." Id . at 858.
Cross motions for summary judgment were filed, and the
district court granted summary judgment for the
defendants and against the Residents. This appeal followed.

II. The Regulatory Scheme

NEPA requires all federal agencies to prepare an
environmental impact statement or EIS for major federal
actions significantly affecting the quality of the
environment. However, Congress authorized HUD to
delegate its responsibilities for environmental review, and
decisionmaking, for UDAG applications to the UDAG
applicant.3 42 U.S.C. S 5304(g)(1). HUD has promulgated
regulations that establish environmental review procedures
for entities assuming HUD environmental review
responsibilities. 24 C.F.R. 58.

HUD requires preparation of an EIS when a project is
determined to have a potentially significant impact on the
human environment. 24 C.F.R. S 58.37. The impact of a
project upon the environment is first assessed by
preparation of an Environmental Assessment ("EA"). 24
C.F.R. S 58.36. If the EA demonstrates that the project will
not pose a significant environmental impact, HUD requires
that a FONSI be published for public comment. 24 C.F.R.
S 58.43. If considerable interest or controversy exists
concerning a project, HUD requires that the public have 30
days to comment before the grant recipient can request
release of funding. 24 C. F. R. S 58.46.
_________________________________________________________________

3. In addition to assuming responsibility for environmental review under
NEPA, HUD requires the grant recipient to comply with requirements
that would apply to HUD relating to historic properties, floodplain
management and wetland protection, coastal zone management, sole
source aquifers, endangered species, air quality, farmlands protection,
HUD environmental standards, and environmental justice. 24 C.F.R.
S 58.5.

                               6
While NEPA does not specifically address the EA process,
the Council on Environmental Quality ("CEQ") promulgated
regulations for implementing NEPA that address this
process and establish requirements for public participation.
40 C.F.R. S 1501.4. CEQ does not expressly require
agencies to involve the public during preparation of an EA.
40 C.F.R. S 1508.9. CEQ does, however, require agencies to
"hold or sponsor hearings or public meetings whenever
appropriate or in accordance with statutory requirements
applicable to the agency." 40 C.F.R. S 1506.6(c). In
determining when a public hearing is appropriate, CEQ
directs agencies to consider whether substantial
environmental controversy exists concerning the proposed
action or whether substantial interest exists in holding a
hearing. 40 C.F.R. 1506.6(c)(1).

While public hearings may or may not be required during
an EA, agencies are required to make findings of no
significant impact available to the affected public. 40 C.F.R.
S 1501.4(e)(1). CEQ only requires that an agency make its
FONSI available for public review, however, when the
proposed action is closely similar to one that normally
requires an EIS or when the nature of the proposed action
is one without precedent. 40 C.F.R. S 1501(4)(e)(2).

HUD promulgated regulations that establish procedures
for implementing NEPA and the CEQ regulations. 24 C.F.R.
Part 58. HUD's procedures do not require a grant recipient
to conduct public hearings during preparation of an EA. 24
C.F.R. S 58.40. HUD only requires a grant recipient to
consider holding a public hearing when an EIS is required.4
_________________________________________________________________

4. HUD identifies factors that the grant recipients should consider in
determining whether to hold public hearings during an EIS. 24 C.F.R.
S 58.59(a). These factors include (1) the magnitude of the project in
terms of economic costs, the geographic area involved, and the
uniqueness or size of commitment of resources involved; (2) the degree
of interest in or controversy concerning the project; (3) the complexity
of
the issues and the likelihood that information will be presented at the
hearing which will be of assistance to the responsible entity; and (4) the
extent to which public involvement has been achieved through other
means. Id. The Residents point to these factors to support their
contention that the City was required to hold public hearings before
making its decision to issue a FONSI. Appellants' Br. at 25. These
factors, however, only apply to the determination of whether to hold
public hearings during an EIS.

                               7
24 C.F.R. S 58.59. HUD does require, however, that FONSIs
be made available for public review for 30 days when
"[t]here is a considerable interest or controversy concerning
the project." 24 C.F.R. S 58.46(a).

Although HUD does not require a grant recipient to
conduct public hearings during the EA process, an
opportunity for public participation is required as part of
the general grant application process under the UDAG
program.5 24 C.F.R. S 570.454(a). Specifically, HUD
requires a grant applicant to hold public hearings prior to
submission of a full application to obtain views of citizens,
particularly neighbors who reside in the vicinity of the
proposed project. Id. When submitting a full application for
HUD to review, a UDAG applicant must include, among
other things:

       The status of environmental review of the proposed
       project, the steps taken to notify other involved federal
       agencies if joint funding is requested, and a proposed
       timetable for the completion of any required
       environmental actions as described in 24 C.F.R. part
       58; and

       A certification providing assurance that prior to
       submission of its application, it has met the citizen
       participation requirements of S 570.454(a) and has
       made the impact analysis required by S 570.454(b).

24 C.F.R. S 570.458(c)(4) & (c)(14)(i). When, as here, an
applicant submits a significant amendment to a project
that has previously been approved, HUD may approve the
amendment if the amendment complies with all the
regulatory requirements of the UDAG program. 24 C.F.R.
S 570.463(b)(2).
_________________________________________________________________

5. In 1996, HUD repealed the provisions of 24 C.F.R. pt. 570, subpt. G,
relating to the application and approval of new UDAGs, characterizing
these regulations as "obsolete" because no funds had been appropriated
for new UDAGs for a number of years. The City and HUD agreed to use
the repealed requirements as a familiar guide to ensure compliance with
the statutory requirements imposed by the UDAG program. City's Brief
at 10 n.4.

                               8
III. Standing

In the district court, the City challenged the Residents'
standing in a motion to dismiss under Fed. R. Civ. P.
12(b)(1). The district court assumed that the Residents' had
standing, without deciding the question, and entered
summary judgment against the Residents on the merits of
their claims. However, the Supreme Court has recently
cautioned against the practice of assuming jurisdiction and
reaching the merits of a dispute merely because a court
concludes that the suit can be dismissed on the merits
assuming arguendo that jurisdiction exists. In Steel
Company v. Citizens for a Better Environment, 523 U.S. 83,
93 (1998), the Court noted that several Courts of Appeals
"find it proper to proceed immediately to the merits
question, despite jurisdictional objections, at least where (1)
the merits question is more readily resolved, and (2) the
prevailing party on the merits would be the same as the
prevailing party were jurisdiction denied." The Court
referred to this practice as creating "hypothetical
jurisdiction" and stated:

       Hypothetical jurisdiction produces nothing more than a
       hypothetical judgment--which comes to the same thing
       as an advisory opinion, disapproved by this Court from
       the beginning . . . Much more than legal niceties are at
       stake here. The statutory and (especially) constitutional
       elements of jurisdiction are an essential ingredient of
       separation and equilibration of powers, restraining the
       courts from acting at certain times, and even
       restraining them from acting permanently regarding
       certain subjects . . . For a court to pronounce upon the
       meaning or the constitutionality of a state or federal
       law when it has no jurisdiction to do so is, by very
       definition, for a court to act ultra vires.

Id. at 101 (citations omitted). The Court cautioned that
appellate courts must avoid addressing the merits of a
claim based upon an assumption that it has subject matter
jurisdiction.

       On every writ of error or appeal, the first and
       fundamental question is that of jurisdiction, first, of
       this court, and then of the court from which the record

                               9
       comes. This question the court is bound to ask and
       answer for itself, even when not otherwise suggested,
       and without respect to the relation of the parties to it.

Id. at 94 (quoting Great Southern Fire Proof Hotel Co. v.
Jones, 177 U.S. 449, 453 (1900)). Accordingly, we begin our
inquiry with a discussion of whether the Residents have
standing to challenge the UDAG grant that has been
awarded pursuant to the City's fifth amendment to the
City's 1986 UDAG application.

We have recently summarized the requirements for
Article III constitutional standing as follows:

       (1) the plaintiff must have suffered an injury in fact--
       an invasion of a legally protected interest which is (a)
       concrete and particularized and (b) actual or imminent,
       not conjectural or hypothetical; (2) there must be a
       causal connection between the injury and the conduct
       complained of--the injury has to be fairly traceable to
       the challenged action of the defendant and not the
       result of the independent action of some third party
       not before the court; and (3) it must be likely, as
       opposed to merely speculative, that the injury will be
       redressed by a favorable decision.

Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc.,
140 F.3d 478, 484-485 (3d Cir. 1998) (citing Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-561 (1992)).

Here, the basis of the Residents' purported standing was
well developed in the district court even though the court
did not address the issue. We also asked the parties to
address the issue of standing during oral argument on this
appeal. Based upon the uncontested facts in this record,
and the various submissions made before us, it is clear
that Residents live in the Society Hill area, and enjoy the
amenities of the historic district adjacent to, and included
within, Penn's Landing and the Delaware River waterfront.
The Residents' claims all arise from their assertion that the
project for which UDAG funding is sought under the City's
fifth amendment will increase traffic, pollution, and noise in
the Society Hill area where they live. The Residents also
argue that the project will have a detrimental effect on the
ambiance of their historic neighborhood, that it will impair

                               10
their use and enjoyment of Penn's Landing, and that it will
decrease their property values. They also claim that the
project's impact is sufficiently significant to require the City
to prepare an EIS, and that the City has improperly refused
to take certain measures to mitigate the project's purported
harm, or to adopt an alternative development as is allegedly
required by the protections afforded under NEPA and
NHPA.

The City argues that the Residents have not identified
injuries to cognizable legal interests, and that they have
failed to provide any facts to support their allegation that
the proposed project will increase traffic, pollution and
noise, impair their use and enjoyment of the historic
district or waterfront, or decrease their property values. The
City also contends that even if the Residents can satisfy the
injury requirement for standing, the alleged injuries could
not be redressed by a favorable ruling in this suit.

However, the City's argument against the Residents'
standing conflates issues of standing and questions of
proof. We think that it is clear that the Residents are
alleging injury to a legally protected interest--that of
maintaining the environmental and historic quality of their
neighborhood. Indeed, the regulatory scheme of NEPA,
HCDA and the procedural requirements for awarding UDAG
grants are intended to protect those persons who would be
most directly affected by a project that is to be funded from
UDAG funds. If the Residents do not have standing to
protect the historic and environmental quality of their
neighborhood, it is hard to imagine that anyone would have
standing to oppose this UDAG grant. If that is the case, the
requirement for public hearings, and public input would be
little more than a meaningless procedural calisthenic that
would provide little or no protection to those most directly
affected by the governmental action -- the people who live
in the vicinity of a federally funded project, and whose lives
are most directly impacted by the expenditure of UDAG
funds.

The Residents have alleged concrete and particularized
injury in the form of increased traffic, pollution, and noise
that will detrimentally impact the ambiance of their historic
neighborhood and their ability to use and enjoy the Penn's

                               11
Landing waterfront. They assert that the impact of the
proposed project on their neighborhood will decrease their
property values. There is no assertion that these claims are
disingenuous or that the Residents claim these injuries
merely to manufacture a jurisdictional case or controversy
that would not otherwise exist. Moreover, the interest of the
Residents is anything but manufactured. It is as real as it
is fervent, and it is sufficient to give the Residents standing
to challenge the requested UDAG grant.6 The City counters
the Residents' claims in part, by reminding us that the
City's obligation is to all of the residents of Philadelphia,
and not just to those people who live near Penn's landing.
The City quite properly notes that it is

       charged with making decisions that benefit the city as
       a whole; both the architect who surveys Penn's
       Landing from his [or her] 15th story window at Society
       Hill Towers and the Port Richmond steelworker who
       could support his [or her] family for a year working on
       the Project. After five years, one mayoral election [now
       two] and the ceaseless drumbeat of Plaintiffs'
       opposition, the City Defendants still believe that the
       Project is in the best interests of all of the residents of
       the city.
_________________________________________________________________

6. Indeed, the City's own brief substantiates the Residents' fervor, and
the depth of their interest in the outcome of the City's UDAG application.
The City notes:

        The Plaintiffs oppose the Project and have commenced three
       separate lawsuits to stop it. They have prosecutedfive appeals to
       keep two of those lawsuits alive. They have protested, collected
       signatures and written letters. They have testified at public
       hearings. . . ."

City's Br. at 4. Of course, the intensity of a party's opposition can not,
by itself, create a case or controversy in the absence of a significant
interest in the outcome that is sufficient to confer subject matter
jurisdiction under Article III. However, the intensity of the Residents'
opposition here is relevant to an evaluation of whether they have a
sufficient interest in the outcome to have standing. We think it obvious
that their interest in the City's UDAG application is genuine, and the
nexus between the challenged conduct and their asserted injuries is
sufficiently immediate to establish standing.

                               12
City's Br. at 4. We recognize the sincerity of the City's
assertion of its obligation to all of the city's residents.
However, that duty does not lessen or alter the particular
interest that the Residents have in this UDAG application.
In a very real sense, it is their neighborhood that is being
impacted by this federal expenditure, and not that of the
illustrative, hypothetical steelworker in Port Richmond.
Though the latter has an interest in the project, the interest
of the Residents is qualitatively different, and far more
immediate and focused. They are not raising "a generally
available grievance about government--claiming only harm
to [their] and every citizen's interest in proper application of
the Constitution and laws, and seeking relief that no more
directly and tangibly benefits [them] than it does the public
at large." Lujan v. Defenders of Wildlife, 504 U.S. 555, 573-
574 (1992). It is not mere hyperbole to proclaim that this
project "hits them where they live." Thus, the Residents
have demonstrated an interest in the City's fifth
amendment to its UDAG application that more than
satisfies the first prong of Article III standing.

The Residents also meet the causation and redressibility
prongs of Article III standing. The injury alleged by the
Residents would directly result from construction of the
proposed project. Moreover, the alleged injury may well be
redressed if the City is required to more fully evaluate the
environmental and historic impacts of the proposed project,
and take appropriate action to mitigate any identified
detrimental impacts of the project.

The concept of standing implicates prudential
considerations that overlap, but extend beyond our inquiry
under Article III. We have summarized those prudential
principles as follows:

       (1) the plaintiff generally must assert his own legal
       rights and interests, and cannot rest his claim to relief
       on the legal rights or interests of third parties; (2) even
       when the plaintiff has alleged redressable injury
       sufficient to meet the requirements of Article III, the
       federal courts will not adjudicate abstract questions of
       wide public significance which amount to generalized
       grievances pervasively shared and most appropriately
       addressed in the respective branches; and (3) the

                                13
       plaintiff 's complaint must fall within the zone of
       interests to be protected or regulated by the statute or
       constitutional guarantee in questions.

Trump Hotels, 140 F.3d at 485 (citations and internal
quotations omitted). As noted above, the Residents are
asserting their own legal interests; they are not raising an
abstract question of wide public significance, and their
interest is within the zone of interests protected by NEPA
and NHPA. We, therefore, find that the Society Hill
Residents have standing to bring this suit.

IV. Standard of Review

The Residents contend that the district court erred in
granting summary judgment for the City and HUD on the
Residents' APA, NEPA and NHPA claims. Our review of the
district court's grant of summary judgment is plenary.
Sameric Corp. of Delaware, Inc. v. City of Philadelphia, 142
F.3d 582, 590 (3d Cir. 1998). In their claim under the APA,
the Residents contend that the City's environmental review
of the UDAG project and HUD's approval of the City'sfifth
amendment to its UDAG application are arbitrary and
capricious and fail to comply with NEPA. The Residents
also allege that the City failed to provide for meaningful
public participation in the UDAG application review
process, failed to consider the cumulative impacts of
proposed development in the Penn's Landing area, failed to
consider appropriate alternatives, and failed to properly
weigh the public controversy surrounding the project in
deciding whether an environmental impact statement was
required.

The Supreme Court has summarized the standard of
review we must apply in an appeal under the APA as
follows:

       [T]he generally applicable standards of S 706 require
       the reviewing court to engage in a substantial inquiry.
       Certainly, the [agency's] decision is entitled to a
       presumption of regularity. But that presumption is not
       to shield [the agency's] action from a thorough,
       probing, in-depth review. The court is first required to
       decide whether the [agency] acted within the scope of

                               14
       [its] authority . . . Scrutiny of the facts does not end,
       however, with the determination that the [agency] acted
       within the scope of [its] statutory authority. Section
       706(2)(A) requires a finding that the actual choice
       made was not arbitrary, capricious, an abuse of
       discretion, or otherwise not in accordance with law. To
       make this finding the court must consider whether the
       decision was based on a consideration of the relevant
       factors and whether there has been a clear error of
       judgment. Although this inquiry into the facts is to be
       searching and careful, the ultimate standard of review
       is a narrow one. The court is not empowered to
       substitute its judgment for that of the agency. Thefinal
       inquiry is whether the [agency's] action followed the
       necessary procedural requirements.

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402,
415-417 (1971) (citations omitted).

The dispute here centers in large part upon the City's
conclusion that it need not prepare an EIS, based upon its
Finding of No Significant Impact at the conclusion of its
Environmental Assessment. Although it is clear that we
review HUD's approval of the UDAG application to
determine if it is arbitrary and capricious, it is not as clear
that the same standard applies to our review of the City's
decision to forego preparation of an EIS based upon its
FONSI. However, in Marsh v. Oregon Natural Resources
Council, 490 U.S. 360 (1989), the Supreme Court reviewed
an agency decision to forego preparation of a supplemental
EIS under the arbitrary and capricious standard. Here, the
district court relied upon Marsh in applying that standard
of review to its scrutiny of the City's decision to not prepare
an EIS. Other Courts of Appeals that have addressed this
issue have interpreted Marsh as applying the arbitrary and
capricious standard to a review of an administrative
decision to not prepare an EIS based upon a FONSI. See
Lockhart v. Kenops, 927 F.2d 1028, 1032 (8th Cir.), cert.
denied, 502 U.S. 863 (1991), and Sabine River Authority v.
U.S. Dept. of Interior, 951 F.2d 669, 677-78 (10th Cir.). We
believe the district court was correct in adopting that
standard of review, and it is the standard we will apply
here.

                               15
A. Compliance with Public Participation
       Requirements.

The Residents raise both procedural and substantive
issues with the manner in which the City conducted public
hearings on the proposed project. Procedurally, the
Residents contend that HUD regulations required the City
to hold public hearings before the City submitted its
amended grant application and before the City decided
whether the project had a significant environmental impact.
Appellants' Brief at 20. The Residents further contend that,
even though the City purported to hold public hearings,
those hearings did not comply with the substantive public
participation requirements because the City had already
decided to proceed with the project and never gave any
consideration to the opposition that was voiced during the
public hearings.

Applicants for UDAG grants are required to hold public
hearings prior to applying for a grant in order to obtain the
general views of citizens and neighboring residents,
particularly those of low and moderate income. 24 C.F.R.
570.454(a) & (b). HUD also requires grant applicants to
allow the public to review an applicant's FONSI. 24 C.F.R.
S 58.46. Here, the City held public hearings on the
proposed project and provided an opportunity for the public
to review its FONSI at the conclusion of the City's EA.
However, the Residents contend that these "hearings" were
little more than a charade. They argue that the City did not
provide for meaningful public participation because the
hearings were held after the UDAG application had been
submitted to HUD.7 In support of their claim that the City
never had any intention of considering public comments,
the Residents assert that the Executive Director of the City
Planning Commission stated that the project was a"done
deal" before public hearings were held. Similarly, the
Residents point to testimony that the Vice President of the
_________________________________________________________________

7. As noted above, this application was actually the fifth amendment to
a UDAG application first approved by HUD in 1986 to partially fund a
festival park at Penn's Landing. Because this amendment proposed a
completely new project, the City was required to comply with all the
requirements of the UDAG program. 24 U.S.C. 570.463(b)(2).

                               16
Philadelphia Industrial Development Corporation ("PIDC")
confirmed that the project was a "done deal as far as local
politics are concerned" prior to any hearings on the UDAG
application. Appellants' Br. at 24. Thus, according to the
Residents, the City's act of withdrawing its priorflawed
application and resubmitting a virtually identical one as its
"fifth amendment" could not cure the regulatory and
statutory defects in the City's UDAG application.

Although the statutory and regulatory scheme pertaining
to UDAG grants require public hearings prior to submission
of an application, nothing in the regulations prevent an
applicant from curing a procedural defect in a UDAG
application by withdrawing the defective application, curing
the defect, and then resubmitting the application. That is
what occurred here. The initial application and earlier
amendments were submitted without proper public
notification and hearings. The prior amendment was
withdrawn, hearings were held, and the application was
then resubmitted. Under the circumstances, we understand
why the Residents might feel that their opposition fell upon
deaf ears even though they were finally able to voice it.
However, the record here is to the contrary. It shows that
the City did not totally ignore the concerns of neighborhood
residents, though those concerns were clearly not
addressed to the extent, or in the manner, that the
Residents would have liked. Accordingly, as we discuss
more thoroughly below, we can not conclude that the
decision to forego an EIS was "arbitrary or capricious" or
"without observance of procedure required by law" under
the APA. 5 U.S.C. S 706(2).

B. The Cumulative Impact of the Project
       on the Neighborhood.

As noted above, CEQ regulations provide the framework
for how cumulative impacts are to be addressed in an EA.
When an EA concludes with a FONSI, an agency is required
to briefly present why an action will not have a significant
impact on the human environment. 40 C.F.R. S 1508.13.
CEQ identifies factors that should be considered in
determining whether an impact is significant. 40 C.F.R.
S 1508.27. Although the impact of a particular project may

                               17
be inconsequential when considered in isolation, if the
cumulative impact of a given project and other planned
projects is significant, an applicant can not simply prepare
an EA for its project, issue a FONSI, and ignore the overall
impact of the project on a particular neighborhood. 40
C.F.R. S 1508.27(b)(7). Thus, CEQ directs agencies to
consider:

       Whether the action is related to other actions with
       individually insignificant but cumulatively significant
       impacts. Significance exists if it is reasonable to
       anticipate a cumulatively significant impact on the
       environment. Significance cannot be avoided by
       terming an action temporary or by breaking it down
       into small component parts.

Id. CEQ defines "cumulative impact" as "the impact on the
environment which results from the incremental impact of
the action when added to other past, present, and
reasonably foreseeable future actions regardless of what
agency (Federal or non-Federal) or person undertakes such
other actions." 40 C.F.R. S 1508.7. Cumulative impacts can
result from individually minor but collectively significant
actions taking place over a period of time. Id . HUD directs
entities conducting environmental reviews to "group
together and evaluate as a single project all individual
activities which are related either on a geographical or
functional basis, or are logical parts of composite of
contemplated actions." 24 C.F.R. S 58.32(a).

In Kleppe v. Sierra Club, 427 U.S. 390 (1976) the
Supreme Court addressed the question of when the
cumulative impact of other projects must be included in an
environmental analysis. The Court stated "when several
proposals for [ ] actions that will have cumulative or
synergistic environmental impact upon a region are pending
concurrently before an agency, their environmental
consequences must be considered together." Id . at 410. The
Court noted however, that the concept of "cumulative
impact" was not intended to expand an inquiry into the
realm of the fanciful.

       The statute, however, speaks solely in terms of
       proposed actions; it does not require an agency to

                               18
       consider the possible environmental impacts of less
       imminent actions when preparing the impact statement
       on proposed actions. Should contemplated action later
       reach the stage of actual proposals, impact statements
       on them will take into account the effect of their
       approval upon the existing environment; and the
       condition of that environment presumably will reflect
       earlier proposed actions and their effects.

Id. at 410 n.20. In National Wildlife Federation v. FERC, 912
F.2d 1471, 1478 (D.C. Cir. 1990), the Court of Appeals for
the D.C. Circuit amplified the holding in Kleppe as follows:

       Kleppe thus clearly establishes that an EIS need not
       delve into the possible effects of a hypothetical project,
       but need only focus on the impact of the particular
       proposal at issue and other pending or recently
       approved proposals that might be connected to or act
       cumulatively with the proposal at issue.

In Sierra Club v. Froehike, 534 F.2d 1289, 1297 (8th Cir.
1976), the Court of Appeals for the Eighth Circuit
summarized the then existing case law pertaining to
"segmentation" -- another term for expressing the
cumulative impact of a project. The court stated:

       Where it is found that the project before the court is an
       essentially independent one, an EIS for that project
       alone has been found sufficient compliance with the
       act. In such a case there is not irretrievable
       commitment of resources beyond what is actually
       expended in an individual project.

Similarly, in Webb v. Gorsuch, 699 F.2d 157, 161(4th Cir.
1983), the court concluded:

       Generally, an administrative agency need consider the
       impact of other proposed projects when developing an
       EIS for a pending project only if the projects are so
       interdependent that it would be unwise or irrational to
       complete one without the others.

That standard was adopted by the Court of Appeals for the
Tenth Circuit in Park County Resource Council v. USDA,
817 F.2d 609, 623 (10th Cir. 1987), overruled on other
grounds, Village of Los Ranchos De Albuquerque v. Marsh,

                               19
956 F.2d 970, 973 (10th Cir. 1992), and Airport Neighbors
Alliance v. U.S., 90 F.3d 426, 433 (10th Cir. 1996). In
Airport Neighbors Alliance, the court found that the
remaining components of the airport's master plan were not
"so interdependent that it would be unwise or irrational to
complete the Runway 321 upgrade without them." Id.
Accordingly, the court held that the FAA had not
"inappropriately ignored cumulative impacts when it failed
to analyze extensively the remaining components of the
Master Plan in the EA." The court reasoned that,"requiring
a cumulative EIS analyzing possible future actions
postulated in a twenty-year Master Plan that are far from
certain would result in a `gross misallocation of resources,
would trivialize NEPA and would diminish its utility in
providing useful environmental analysis for major federal
actions that truly affect the environment.' " Id. at 431
(quoting Park County, 817 F.2d at 623).

Similarly, under circumstances analogous to those
presented here, the Court of Appeals for the Fifth Circuit
concluded that the City of New Orleans appropriately
limited its environmental review under the UDAG program
to a proposed hotel, retail and parking development. Vieux
Carre Property Owners v. Pierce, 719 F.2d 1272 (5th Cir.
1983). The court concluded that other phases in the City's
Master Plan for the area affected by the UDAG grant project
(Phases III through V) were "indefinite and speculative in
nature; [as] no final plans nor private funding commitments
exist as to Phases III through V, and no further design work
or land acquisition as to Phases IV and V has been
performed since 1978." Id. at 1275. Although we realize
that some courts have adopted a more expansive approach
to requiring a UDAG applicant to determine cumulative
impact, we agree with the holding in Webb that such a
determination must be governed by considerations of
whether other projects are so "interdependent that it would
be unwise or irrational to complete one without the others."8
_________________________________________________________________

8. See LaFlamme v. FERC, 852 F.2d 389 (9th Cir. 1988). There, the court
concluded that the applicant's finding of no potential for adverse
cumulative impact on the environment could not be sustained because
the applicant "[had] not considered the impact that all past, present, and
reasonably foreseeable future projects may have on the basin's
resources, . . .." Id. at 402.

                               20
Webb, at 161. However, we believe that a court must also
consider the likelihood that a given project will be
constructed along with the interdependence of other
projects. The more certain it is that a given project will be
completed, the more reasonable it is to require a UDAG
applicant to consider the cumulative impact of that project
and the applicant's project in determining the applicant's
obligations under the applicable regulations.

The Residents contend that the City's EA was deficient
because the City did not consider the impact of future
development that had been identified in several planning
documents9 including a proposed"mega" entertainment
complex planned at Penn's Landing. However, projects that
the City has merely proposed in planning documents are
not sufficiently concrete to warrant inclusion in the EA for
the hotel/parking garage project at issue here. The district
court correctly focused upon the likelihood that the other
projects will be completed as well as the interdependence of
the hotel/parking-garage and those other projects. In doing
so it stated:

       First, the Court notes that the evidence does not
       suggest that the City could not sever any connection
       between the hotel and other projects without
       destroying the proposed action's functionality. Second,
       plaintiffs do not point to any evidence in the
       administrative record that realization of the future
       plans was, indeed, expected to materialize. NEPA only
       requires consideration of the cumulative impact of
       proposed, and not merely contemplated future actions.
       Where future development is unlikely or difficult to
       anticipate there is no need to study cumulative
       impacts. Thus, the Court concludes that based on the
       record, the City was not required to conduct a
       cumulative impact analysis as part of the EA.
_________________________________________________________________

9. The Residents point to six plans referenced by the City in its
environmental assessment: the Comprehensive Land Use Plan; the Plan
for Center City; the Penn's Landing Master Plan; the Penn's Landing
Development Plan; the Central Riverfront District Plan; and the River
Walk Plan.

                               21
20 F. Supp. 2d at 870 (citations and internal quotations
omitted). Although an EA may need to include a cumulative
impact analysis even if it is practical to sever any
connection between a project and other projects if it is
sufficiently certain that such other projects will be
constructed, we nevertheless agree with the district court's
analysis here.10 It is not at all certain that the proposed
"mega" entertainment complex or any of the projects
included in the planning documents will ever be completed.

Moreover, even if the Residents could establish that these
projects were going to be completed, that finding would not
undermine the City's FONSI because the district court
concluded that those projects and the hotel/parking garage
are not sufficiently interdependent. The success of a hotel
and parking garage in the Penn's Landing is not tied to
construction of an entertainment complex. Moreover, plans
for the Penn's Landing area appear to change regularly.
Given the circumstances here, the City should not be
required to evaluate and reevaluate the environmental
impacts of such projects as part of the EA for this UDAG
application with every change in the plans for development
of Penn's Landing no matter how tenuous the contemplated
project may be.

C. Alternatives to the Project.

NEPA requires all Federal agencies to "[s]tudy, develop,
and describe appropriate alternatives to recommended
courses of action in any proposal which involves unresolved
conflicts concerning alternative uses of available resources."
42 U.S.C. 4331(2)(E). The CEQ regulations require that EAs
include a brief discussion of the need for the proposal, of
alternatives as required by section 102(2)(E) of NEPA, and
of the environmental impacts of the proposed actions and
alternatives. HUD regulations require an EA to "[e]xamine
and recommend feasible ways in which the project or
external factors relating to the project could be modified in
_________________________________________________________________

10. "[W]e do not propose to attempt the impossible, namely, the
enunciation of a general rule that will cover all cases. The crucial
dependence is upon the facts before the court in the particular case sub
judice." Sierra Club v. Froehike, 534 F.2d 1289, 1297 (8th Cir. 1976).

                                  22
order to eliminate or minimize adverse environmental
impacts" and "[e]xamine alternatives to the project itself, if
appropriate, including the alternative of no action." 24
C.F.R. S 58.40(d) & (e).

The Residents contend that the City's finding of no
significant impact is arbitrary and capricious because the
City improperly rejected an alternative location for the
project. Appellants' Br. at 41. The Residents urged the City
to consider locating the proposed hotel just south of the
foot of Market Street. Id. The Residents contend that
location is better suited for a hotel because it is a larger site
which will allow a structure with a larger footprint and a
lower overall profile, while providing the same total capacity
without leading traffic directly into the narrow streets of
Society Hill via Dock Street. Id. The Residents state, and
the City does not dispute, that the City rejected the
alternative location because the Development Plan adopted
by the City Planning Commission prohibits the construction
of structures at the ends of various streets to protect east-
west views from Center City to the river, the location would
have a closer proximity to resources listed on the National
Register of Historic Places, and the alternative location
would have required alteration or relocation of several
interceptor sewers at significant cost. Id. The Residents
contend that these reasons are not legitimate, however,
because the City has planned since 1963 to build a 50-
story office tower at the alternative location. Id.

NEPA only requires that appropriate alternatives be
considered. 42 U.S.C. S 4332(2)(E). NEPA does not mandate
that any particular alternative be selected during an EA.
See Limerick Ecology Action, Inc. v. Nuclear Regulatory
Commission, 869 F.2d 719, 730 n.9 (3d Cir. 1989)(NEPA
imposes procedural requirements, not substantive
outcomes). The City did consider the alternative proposed
by the Residents and the City provided reasons for not
selecting that alternative location. While the City did not
select the location preferred by the Residents, the City
notes that new traffic analyses were conducted and
included in the record in response to concerns raised
during the public comment period. The Residents would
have us view the City's reasons for not selecting the

                               23
alternate location as arbitrary and capricious because the
City allegedly has had plans for over 25 years to build a
larger structure at this same location near the foot of
Market Street. The Residents have not shown, however,
that the City actually intends to build that structure.

D. The Controversial Nature of the UDAG Application.

Under a heading entitled: "The Public Outcry Demands
Preparation of an EIS," the Residents argue,"[e]xistence of
a public controversy relating to a project is a factor that an
agency should consider in assessing whether to prepare an
EIS." Appellants' Br. at 43. The CEQ identifies ten factors
that should be considered in determining if a project's
impact is so significant that an EIS is required, and one of
these factors is the degree to which the effects on the
quality of the human environment are likely to be highly
controversial. 40 C.F.R. S 1508.27(b)(4). However, in Hanly
v. Kleindienst, 471 F.2d 823, 830 (2d Cir. 1972), the court
states:

        [T]he term `controversial' apparently refers to cases
       where a substantial dispute exists as to the size,
       nature or effect of the major federal action rather than
       to the existence of opposition to a use, the effect of
       which is relatively undisputed . . . The suggestion that
       `controversial' must be equated with neighborhood
       opposition has also been rejected by others.

Here, the Residents have not raised a substantial dispute
regarding the environmental effects identified by the City in
its EA for this project. Rather, the controversy here centers
on the Residents' opposition to the City's choice of location
for the project. Moreover, even if the issues that the
Residents raise could be deemed to raise a "controversy"
under the regulations, it is important to note that the
existence of a controversy is only one of the ten factors
listed for determining if an EIS is necessary. Given the
nature of the "controversy" involved and the fact that
degree of controversy is only one of ten factors to be
considered in determining whether a significant impact is
present, we can not conclude that the City's decision to
issue a FONSI was arbitrary and capricious.

                                24
V. Approval Under NHPA

Finally, the Society Hill Residents contend that the
district court erred in granting summary judgment to the
City and HUD on the Residents' claim under NHPA.

Regulations implementing NHPA are set forth in 36
C.F.R. S 800 et seq. The regulations include specific
requirements for implementing NHPA under the UDAG
program. 36 C.F.R. S 801. The UDAG regulations provide
that the UDAG applicant, rather than HUD, must comply
with the regulations. 36 C.F.R. S 801.2(b). A UDAG
applicant is required to identify National Register
properties, and properties that may meet the criteria for
listing on the National Register, that may be affected by the
project. 36 C.F.R. S 801.3(b). The applicant is also required
to determine the effect of the project on these properties
pursuant to criteria set forth in the regulations. 36 C.F.R.
S 801.3(c).

If an applicant determines that the project will have no
effect on any identified historic properties, the project
requires no further review by the Advisory Council on
Historic Preservation (hereinafter "Council") "unless a timely
objection is made by the Executive Director." 36 C.F.R.
S 801.3(c)(2)(i) (emphasis added). An applicant is required to
seek comments from the Council to satisfy the applicant's
responsibilities under section 106 of NHPA. 36 C.F.R.
S 801.4. The regulations require the following:

       Upon receipt of a Determination of No Adverse Effect
       from an applicant, the Executive Director will review
       the Determination and supporting documentation
       required by S 801.7(a). Failure to provide the required
       information at the time the applicant requests Council
       comments will delay the process. The Executive
       Director will respond to the applicant within 15 days
       after receipt of the information required in S 801.7(a).
       Unless the Executive Director objects to the
       Determination within 15 days after receipt, the
       applicant will be considered to have satisfied its
       responsibilities under section 106 of the Act and these
       regulations and no further Council review is required.

                               25
36 C.F.R. S 801.4(b)(1). The documentation required to
support a Determination of No Adverse Effects includes:

       (i) A general discussion and chronology of the pro posed
       project;

       (ii) A description of the proposed project includi ng, as
       appropriate, photographs, maps, drawings and
       specifications;

       (iii) A copy of the National Register form or a co py of
       the Determination of Eligibility documentation for each
       property that will be affected by the project including a
       description of each property's physical appearance and
       significance;

       (iv) A brief explaining why each of the Criteria o f
       Adverse Effect (See statement S 801.3(c)(1)) was found
       inapplicable;

       (v) Written views of the State Historic Preservati on
       Officer concerning the Determination of No Adverse
       Effect, if available; and,

       (vi) An estimate of the cost of the project includ ing the
       amount of the UDAG grant and a description of any
       other Federal involvement.

36 C.F.R. S 801.7(b)(1).

During oral argument we expressed our concern that the
record did not reflect that the City had afforded the
Advisory Council for Historic Preservation an opportunity to
respond to the City's finding that the UDAG project would
have no adverse affect on the nearby historic district and
we asked the parties to submit documentation to support
their respective contentions on this issue. See 16 U.S.C.
S 470f. The City responded in a letter in which it asserted
that review by the Advisory Council was not required under
36 C.F.R. pt. 801 ("Part 801") because HUD had delegated
the responsibility for assessing the project's impact on the
historic district to the City, and the City had determined
that there was no impact.

In response, the Residents agreed with the City's
assertion that the applicant's determination of no effect
eliminates the necessity for further review by the Council

                                26
"unless a timely objection is made by the Executive
Director," 36 C.F.R. S 801.3(c)(2)(I). However, the Residents
argued that: the City's determination of no impact was
never submitted to the Executive Director; the City never
made a determination of no effect on any National Register
property under NHPA (as distinct from any review under
NEPA); and the Pennsylvania Historical and Museum
Commission failed to make its views known as is required
under 36 C.F.R. S 801.3(b)(5), as the Commission "merely
accepted the findings of the City's Historical Preservation
Officer;" and that the Philadelphia Historical Preservation
Officer "was demonstrably wrong when he found that a
visual barrier protected Society Hill and Old City from the
visual impact of the hotel tower and garage wall." However,
in their brief on appeal, the Residents' only asserted the
following challenge to the City's failure to seek approval of
the Advisory Council:

        The District Court concluded that the City met its
       delegated responsibility under the NHPA which made
       review by the Advisory Council unnecessary.

        The record, however, shows that the findings on
       historical impact were based upon the City Historical
       Preservation Officer's belief that "construction along
       Front Street obstructs the view of the proposed hotel
       from the historic district," and that the result of this
       "visual barrier" is that "the proposed hotel development
       on Penn's Landing will have no effect on the Society
       Hill National Historic District."

        This conclusion is clearly erroneous. . . .

Appellants' Br. at 47. Accordingly, the allegations of error
asserted by the Residents in their letter, other than the
assertion that the findings on historical impact were clearly
erroneous, have been waived and we will not now address
them.11
_________________________________________________________________

11. We note that NHPA appears to require that the appropriate agency or
the applicant (where, as here, the agency delegates compliance to the
applicant) obtain the review of the Advisory Council. NHPA states that
the appropriate agency:

                               27
Although the Residents clearly disagree with findings
pertaining to the line of sight of the proposed project, and
the project's impact on the historical district, those findings
are not clearly erroneous. Accordingly, we conclude that the
district court did not err in holding that no further
authorization from the Advisory Council was required.

        VI.

Accordingly, for the reasons set forth above, we will
affirm the district court's grant of summary judgment to the
City and HUD on the Residents' APA, NEPA and NHPA
claims.

A True Copy:
       Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

_________________________________________________________________

        shall, prior to the expenditure of any federal funds on [an]
        undertaking . . . take into account the effect of the undertaking
on
        any district, site, building, structure, or object that is included
in or
        eligible for inclusion in the National Register. The head of any
such
        Federal agency shall afford the Advisory Council on Historic
        Preservation . . . a reasonable opportunity to comment with regard
        to such undertaking.

16 U.S.C. S 470f (emphasis added). Accordingly, the procedure
authorized under 36 C.F.R. S 801.3(c)(2)((i) appears to be inconsistent
with the statute. However, as noted above, the Residents did not raise
this issue in their opening brief and we will not now address it. See
Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398
(3d Cir. 1994)("An issue is waived unless a party raises it in its opening
brief. . . .").

                                28
