environmental assessment on the merits but rather must accept this finding as long as it is assured that the recipient has complied with NEPA's procedural requirements and HUD's regulations. See Dickeyville, 636 F. Supp. at 366; Colony Federal, 482 F. Supp. at 303. To the extent that Cornell disagrees only with the substance of the City's environmental assessment findings -- including the City's decision not to prepare an EIS -- this claim must fail. Cornell raises, however, two procedural challenges to the city's environmental finding of no significant impact, and these claims deserve careful consideration.
a. Incomplete Environmental Assessment at time of Application
On July 16, 1986, the City of Chicago filed, with its application for a Housing Development Grant, a certification that the City had completed an environmental assessment and had determined that the Park Tower project would have no significant impact on the environment. Cornell acknowledges this certification but asserts that at the time of this submission, the environmental assessment was far from complete and that the application should therefore not have been processed by HUD. Citing 24 C.F.R. § 58.41, Cornell argues that a finding of no significant impact can only been made upon the completion of an environmental assessment,
and 24 C.F.R. § 850.33(m) requires that the applicant's environmental assessment finding pursuant to § 58.41 must be included in a Housing Development Grant application.
While apparently conceding that the environmental assessment in this case had not been completed when the application was filed, HUD maintains that the finding of significant or no significant impact "required to be submitted as part of the application is assumed by HUD to be an interim finding based upon a preliminary evaluation" (Reply Memorandum at 7). In support of this assertion, HUD offers a 1978 Federal Register citation
indicating that a related requirement in applications for grants under the Urban Development Action Grant ("UDAG") Program was intended only to ensure that the environmental assessment process had begun. See 43 Fed. Reg. 1602, 1603 (1978) (regulation codified at 24 C.F.R. § 570.454(c) (1990)). The regulation discussed in this citation, however, refers to a requirement of an "environmental clearance finding" in the UDAG application. See 24 C.F.R. § 570.454(c). Housing Development Grant applications, by contrast, must contain the actual environmental assessment finding of significant or no significant impact. See 24 C.F.R. §§ 850.33(m), 58.41. The two application requirements are not sufficiently analogous to permit us to extend the evidence of HUD's intent from the UDAG to the Housing Development Grant context and to assume that § 850.33(m), too, requires only a preliminary environmental finding.
We recognize, however, that some of the City's environmental responsibilities under NEPA are meant to be completed after the application is submitted. In the City's certification of completion of environmental assessment, which appears to be a standard HUD form, the City agrees, "upon selection of this project for Housing Development Grant funding, [to] complete all remaining requirements found at 24 C.F.R. Part 58" (emphasis added). Housing Development Grant regulations, moreover, indicate that a recipient cannot spend funds "until the environmental requirements have been met." 24 C.F.R. § 850.63(e) (1989). See also 24 C.F.R. § 58.31 (1989) ("The environmental review process should begin as soon as a recipient determines the projected use of the . . . funds"). But HUD has adduced no evidence supporting the proposition that the environmental assessment finding required on the application need not be based on a completed environmental assessment, and we are troubled by the language in § 58.41 suggesting that a finding of no significant impact is to be made upon completion of the environmental assessment. It is not clear, given the current record, what duties must be performed before the application and what duties may be performed later.
Even if acceptance of this application in light of the incomplete environmental assessment was not proper under HUD's regulations and procedures, however, setting aside this action now, after the full environmental assessment was prepared, would serve no purpose. To be sure, the goals fostered by the National Environmental Policy Act are important and the requirements of that Act should not be flouted, but to require HUD and the city to retrace its steps but in a different order seems to be a concession to undue formalism rather than a promotion of this vital national policy, and we decline to do so.
b. Inadequate Notice
As a second procedural attack on HUD's acceptance of the City's FONSI, Cornell asserts that the City failed to provide them with adequate notice of its environmental assessment finding. Cornell points to two alleged omissions on the part of the City: (1) a failure to give Cornell, as an especially interested party, personal notice of its FONSI; and (2) a failure to give notice before the threshold finding of no significance was made. In support of the first contention, Cornell refers us to Colony Federal, 482 F. Supp. 296, in which the court held that the County's failure to provide specific notice to property owners in an area to be redeveloped under the Housing and Community Development Act may have rendered HUD's acceptance of the environmental assessment finding an abuse of discretion. HUD attempts to distinguish Colony Federal on the basis that the regulation calling for heightened notice in that case applies only to those projects for which a finding of significant impact was made.
This argument does not survive a careful reading of Colony Federal, however. Although the miscited regulation that is quoted in that case
does seem to impose a notice requirement only for the limited situation where an environmental impact statement is to be prepared, a regulation directly following and referring to the requirements of the Colony Federal provision establishes unambiguously that the same notice procedure obtains for projects that are found to have no significant impact on the environment. See 24 C.F.R. §§ 58.16(b); 58.17(b) (1979); Brandon v. Pierce, 725 F.2d 555, 561 (10th Cir. 1984).
Sections 58.16(b) and 58.17(b) no longer contain the notice specifications for the environmental review process, but the substituting regulations, 24 C.F.R. §§ 58.43 and 58.55 (1989), include notice specifications that closely resemble those that they replace. Section 58.43, which establishes the publication and dissemination requirements for findings of no significant impact, provides inter alia :
As a minimum the recipient must send the FONSI to the local new media, to individuals and groups known to be interested in its activities; to appropriate local, State, and Federal agencies; to the Headquarters and appropriate Regional Office of the Environmental Protection Agency, and to the HUD Area Office (or the State, where applicable).
24 C.F.R. § 58.43 (1989) (emphasis added). To the extent that Cornell is an interested party and that HUD knew or should have known of this status, failure to provide it with specific notice constitutes procedural error.
Cornell maintains that it qualifies as an interested party meriting specific notice because of the proximity of the Cornell Village Tower Condominium to the Park Tower site and the injuries that it will allegedly suffer. These circumstances, Cornell argues, render it at least as interested as the property owners in Colony Federal. Although we disagree with the latter assertion, for the Colony Federal plaintiffs owned property that was to be condemned to make way for the project at issue and thus their interest was more manifest, HUD does not object to Cornell's self-characterization as an interested party. HUD does contend, arguing in the alternative, that it cannot be held responsible for this procedural omission because it was not aware of Cornell's special interest in the Park Tower project before approving the City's request for release of funds. This representation appears only in HUD's reply memorandum, however; the record contains no corroborating evidence. Standing alone, this unsupported assertion is not sufficient to establish HUD's lack of knowledge of Cornell's interest as uncontested and cannot sustain HUD's motion for summary judgment on this issue. We therefore find a material fact to remain regarding the very narrow issue of whether HUD knew or should have know of Cornell's special interest (and therefore whether the failure to give personal notice constituted the sort of procedural error that should have triggered a refusal to release funds).
By contrast, Cornell's second notice argument does not survive the summary judgment motion. Cornell concedes that notice of the City's finding of no significant impact was published in a Chicago newspaper but argues that because the publication occurred after the City had made its environmental assessment finding, the public was deprived of an opportunity to contribute meaningful input. In fashioning this argument, Cornell relies on Hanly v. Kleindienst, 471 F.2d 823 (2d Cir. 1972) (" Hanly II "), cert. denied, 412 U.S. 908, 36 L. Ed. 2d 974, 93 S. Ct. 2290 (1973), a case involving the General Services Administration's NEPA responsibilities associated with a plan to build a prison facility in Manhattan. The Second Circuit in Hanly II, discussing the procedures necessary to ensure public input before a finding of significance is made under NEPA, held that
before a preliminary or threshold finding of significance is made the responsible agency must give notice to the public of the proposed major federal action and an opportunity to submit relevant facts which might bear upon the agency's threshold decision.