In Building Industry Ass’n of Superior California v. County of Sacramento, the North State Building Industry Association (BIA), challenged a Sacramento County ordinance that requires developers to make 15 percent of new units affordable to low income families or, in the alternative, dedicate land or pay an in-lieu fee.  The BIA argued that the ordinance constituted a taking because there was no reasonable relationship between the affordable housing provision and the need for affordable housing in the county.  The BIA also alleged that the ordinance’s fees amounted to an unlawful tax under California law.  The Sacramento Superior Court dismissed the claims on a motion from a coalition of affordable housing advocates.  The BIA intends to appeal the dismissal. 

The Indiana Supreme Court limited the ability of property owners to develop vested rights in Metro Dev. Comm’n v. Pinnacle Media, LLC, 836 N.E.2d 422 (2005). Pinnacle Media, which erects and leases billboards, was prevented from erecting billboards after an ordinance was passed that required a permit for billboards erected along an interstate.  When Pinnacle initially sought approval for the billboards, no permit was required.  After the ordinance was enacted, Pinnacle immediately filed for a permit.  Pinnacle relied on a prior Indiana Supreme Court Case which held that a property owner’s rights may vest by filing for a required permit under a newly applicable zoning ordinance.   See Knutzson v. State ex rel. Seberger, 160 N.E.2d 200 (1959).  Pinnacle argued that because it had a permit on file after the ordinance was enacted, it had a vested right to erect the billboards.

The court held that the Knutzson case did not apply, and was “out of line” with cases in other states that allow a zoning ordinance to be retroactively applied.  As a nonconforming use, Pinnacle’s plans to construct billboards did not create a vested right because no significant work had commenced to erect the billboards.  See Lutz v. New Albany City Plan Comm’n, 101 N.E.2d 187 (1951). 

Nevada Supreme Court Issues Decision Involving Permit Caps

In February, the Nevada Supreme Court reversed a lower court ruling on summary judgment that found a sustainable growth initiative limiting the number of new dwelling units in a given year, was inconsistent with the county’s master plan.  Sustainable Growth Initiative Comm. v. Jumpers, LLC, 128 P.3d 452 (Nev. 2006).

Plaintiff, Sustainable Growth Initiative Committee was formed in order to qualify an initiative to limit residential growth in the Carson Valley and the Antelope Valley drainage basins on a sustainable, managed basis.”  128 P.3d at 456.  In 2002, voters in Douglas County, Nevada passed the “Sustainable Growth Initiative” (“SGI”) that limited the number of new dwelling units allowed in Douglas County to 280 per year. Parties filed suit seeking declaratory and injunctive relief to have the SGI struck down on the basis that it was inconsistent with Douglas County’s Master Plan.  On summary judgment motions, the district court agreed finding the SGI in conflict with the Master Plan and held it void ab initio.  All sides appealed on a myriad of claims and issues.  In its opinion, the Nevada Supreme Court made a point in stating that it reviewed the appeal “in the context of summary judgment and not a trial verdict.”  128 P.3d at 458.

The court summarized the three primary issues on appeal:  (1) whether the SGI substantially complies with the Master Plan; (2) whether the SGI is facially constitutional; and (3) whether SGI will require an amendment within three years of its enactment in order to implement, apply, or adopt the SGI.  The court noted the “relevant inquiry is … whether the ordinance ‘is compatible with, and does not frustrate, the [master] plan’s goals and policies.’”  Id. at 462 (brackets in original). 

The court concluded that, under the summary judgment standard, the SGI is “substantially compliant with the Master Plan.” Next, for purposes of the summary judgment motions, the district court did not err in finding the SGI facially constitutional because the SGI was not arbitrary and capricious, and it was substantially related to protecting health, safety, morals and general welfare.  Finally, because it was not inconsistent with the Master Plan, the lower court’s finding that it would require amendment within three years was error. 

A Petition for Rehearing is pending at the Nevada Supreme Court.

New Jersey Supreme Court Rules on the Ability of Municipalities to Use Development Agreements to Delegate the Responsibility for Providing Services to Developers

The New Jersey Supreme Court recently clarified that municipalities may enter into development agreements under which the municipality delegates responsibility for providing certain services to developers.  Ramapo River Reserve Homeowners Ass'n v. Borough of Oakland, ___ A.2d ___ (N.J. 2006) (2006 WL 587590).  However, such agreements cannot impose upon homeowners the requirement that they pay for same services twice; once in the form of homeowners’ association fees and once in the form of property taxes.

In this case, the developer of the Ramapo River Reserve and the Borough of Oakland entered into a development agreement in which the developer agreed to maintain roadways within the development and keep them clear of ice and snow until the development was completed.  The agreement further provided that the developer would indemnify the Borough for any losses arising out of the development.  The developer then created the Ramapo River Reserve Homeowners Association, which was to provide the street clearing services.

Several years later, the Homeowners Association filed suit alleging that, notwithstanding the development agreement, the Borough was required to either provide the services or reimburse the Association for the cost of providing the services.  The Association argued that residents were being charged twice for the cost of removing ice and snow from the roadways because their Homeowners Association fees included the cost of such services as did their property taxes.  The Court Agreed.

As a threshold matter, the Court held that a municipality may delegate to a developer the responsibility for providing certain services until the developer’s control over the executive board of the Homeowners Association is terminated.  However, homeowners cannot then be forced to pay twice for the same services.  Accordingly, the Court decided that the Borough was required to reimburse the Homeowner’s Association for the cost of providing the services.  The Court was then left to determine whether the Borough could recoup those reimbursements from the developer according to the terms indemnification provisions of the development agreement.  The Court decided that the Borough was entitled to the benefit of its bargain with the developer.  Therefore, the Court remanded the case to the trial court for a determination of how much was owed by the developer to the Borough.

Under U.S. Supreme Court precedent, development exactions must be “roughly proportional” in order to be constitutional (see Dolan v. City of Tigard, 512 U.S. 374 (1994)).  However, Dolan dealt with adjudicative exactions spawning a debate over whether the test also applied to legislative exactions.  The Utah Supreme Court recently had the opportunity to weigh in on this debate and held that legislative exactions are subject to the “rough proportionality test.”  B.A.M. Dev., L.L.C. v. Salt Lake County, 128 P.3d 1161 (Utah 2006). 

In this case, a county ordinance required developers to dedicate property that would be used to improve roadways that abut a development (see Salt Lake County Ordinance 15.28.010).  This ordinance is a legislative exaction.  Pursuant to the ordinance, the county requested a forty foot wide parcel from B.A.M. Development.  B.A.M. agreed and received preliminary approval for the development, but after consultations with the Department of Transportation the county decided that a fifty-three foot wide parcel was required.  The developer challenged this decision arguing that the “rough proportionality test” applied to the ordinance and that the county’s exaction was not in proportion to the impact that the development would have.

The issue of whether the “rough proportionality test” applied to legislative exactions was one of first impression for the Court.  However, the Utah legislature settled this issue when it passed Utah Code § 17-27a-507 (2006).  This statute essentially codifies Dolan and it is intended to apply to both legislative and adjudicative exactions.  The county argued that since the statute has a substantive impact on the rights of the parties and it was passed after the exaction was imposed, it could not be applied retroactively to this case.  In other words, the county argued that prior to effective date of the statute, the “rough proportionality test” only applied to adjudicative exactions.  The Court held that while laws with a substantive impact cannot be applied retroactively, the proscription against retroactive application was not relevant in this case.  The Court reasoned that here the statute merely resolved an unsettled question on which the Court had not taken a position.  Accordingly, the Court held that the “rough proportionality test” applied to legislative exactions and remanded the case with instructions to apply the test.