Architect's rendering of the Kilroy project in Carmel Valley

The bell has sounded in a heavyweight battle between two Carmel Valley developers and the City is caught in the middle of it all.

Kilroy Realty, the Los Angeles–based developer of the massive One Paseo project filed suit on May 28 against the city and the owner of the large shopping center across the street for sidestepping environmental review on an upcoming expansion project, one which could potentially impact the approval of One Paseo.

The lawsuit brings more controversy to what was once a sleepy affluent suburb of San Diego. The community awoke in 2012 when Kilroy Realty announced its plans to build a 1.4-million-square-foot mixed-use development proposal on a 23-acre plot located at the corner of Del Mar Heights Road and El Camino Real.

The project was met with opposition from residents who say it is way too large for the community. Residents weren't the only parties opposed to One Paseo. The owner of the Del Mar Highlands Shopping Center has also come out against the project, hiring lobbyists to dissuade councilmembers from approving the project.

Now, in the latest development, Kilroy is striking back. According to the complaint, Del Mar Highlands is attempting to piecemeal approvals on a 150,000 square-foot expansion project of their own and the city is going along with it.

The shopping-center owner is doing so by asking the city to approve small changes; for instance, granting a 24-foot sewer easement before applying for the larger expansion project.

"Despite the limited project description in the [notice of exemption], it is common knowledge within the Carmel Valley community, the Carmel Valley Planning Board, and amongst City staff that the proposed easement vacation is part of a much larger and more extensive project proposed by Real Party — the expansion of the Del Mar Highlands Town Center (the "Expansion Project"). The easement vacation is not a stand-alone item and has no purpose except to pave the way for Expansion Project….

“According to the Council Action Executive Summary Sheet, the ‘public will benefit from the vacation through the improved utilization of the land in that the owners of the property may redevelop the shopping center in the future where currently, the site is constrained due to the existence of the easement.’”

Attorneys for Kilroy argue that giving away easements can only be accomplished through a discretionary process, meaning that council, not city staff, would have to make the final decision.

City staff and the city attorney's office say differently. They say that because there has been no application turned in for the expansion project that they must decide only on the issues presented to them.

"The scope of the project that was submitted for staff review was limited to the water and sewer easement vacation, so that is what we evaluated," reads a memo from city staff that was quoted in the lawsuit. "That type of project falls within the category of minor alteration and land use limitations, which is a Class 5 Categorical Exemption from CEQA. So we based our determination on the project, the scope of the project that was submitted to us.”

The city attorney later agreed with that assessment:” We believe that the case law suggests that where there is no pending project or application for a project as we understand from staff is the case here, that the categorical exemption is proper."

Of course, giving away easements has gotten the city in trouble before. The city and developer Sunroad are currently fighting a lawsuit over two nine-foot open-space easements the city council granted for the Sunroad Centrum project. The decision was vetoed by then-mayor Bob Filner. The veto was later withdrawn after Sunroad agreed to give $100,000 to two of Filner's pet projects. Controversy ensued.

Kilroy is asking that the city take back the easements and conduct adequate environmental review.