Issues that need more discussion, because of a lack of consensus.
* There was no consensus on what level of diminishment of value
would be eligible for compensation.
* The issue of where the legal standing is vis-à-vis partial
takings.
* The establishment of property right or vesting.
* There was no agreement among this group when a property right
is created. One point of view felt that a property right
was established upon purchase of the property. The other
said that the value of the property is established when the use
has been identified.
Bruce Gungle was not present. David reiterated that this was
not an official Steering Committee position, but rather
an identification of the issues.
Panel Discussion:
Participants: Frank Bangs, Lewis and Roca
Steve Betts,
Gallagher and Kennedy
Marc Ebbin,
Esq. (via telephone)
Steve Betts: This actually I think will work out well
and appropriate because I am a land use lawyer, I spend a lot
of time on these issues, but Frank is far more the expert in
the land use litigation area. And so what I'd like to do,
if this is okay with you, Frank, is maybe I'll just take 10 minutes,
kind of go over the overview, walk them through the materials
I (Sorry, I will put this closer to my mouth.) Walk
them through the materials that I've handed out and then allow
you to get into some of the more detailed questions like the
Palazzolo case and partial takings and things like that.
Does that make some sense? Great. The materials I
handed out, hopefully everyone has a copy of this now, it has
Gallagher & Kennedy across the top. I'm going to walk
you through it very quickly and I'm sorry that you didn't get
it early enough to spend a little time reading it ahead of time,
but that was kind of my intent. I didn't want you to actually
catch my spelling errors and things like that ahead of time.
But I'm going to take just 10 minutes, do a brief overview on
regulatory takings and takings law in general. In general
I gave you both the U.S. Constitutional provisions and the Arizona
Supreme Court provisions on the right for compensation if your
property is taken for government use. And so I won't go
into those a great deal further. But there's no question
that if government takes your property, if government says, okay,
sorry, you can no longer have this piece of property, we need
it for a road or we need it for a sewer plant, that under the
constitution, under both the federal and state constitutions,
you get compensated for that. The government can't take
your property without compensating you for it. So that's
kind of a good general rule of law.
Where it really comes into play as interesting is the difference
between, what if government doesn't intend to actually take your
property from you, take it and put it to some government use
like a freeway or a sewage treatment plant, but they want to
regulate your property in a way that they think is fair, is subject
to sort of police powers of the local government. So they're
not intending to actually take the property from you, but they
have the effect of affecting the use of that property and the
property owner claims that you've taken my property values from
me. So that's what the second part of the outline really
goes into. And I gave you a nice quote from Justice Holmes,
the Pennsylvania Coal case, which is the seminal quote
that's used in a lot of cases. "While property may
be regulated to a certain extent, if regulation goes too far
it will be recognized as a taking." Of course, Justice
Holmes is one of the real scholars and started a lot of this
takings case law. Government must pay for property that
is taken for public use, eminent domain. Again, the taking
for a sewage treatment plant or a road. Government does
not need to pay for mere regulation of property. Zoning
is the best example of that. That local governments have
police powers to zone your property. So they can tell people
what they can and can't do with a property and they don't have
to compensate if government is using those police powers.
And that's what the paragraph below sort of gets into more detail
about.
So, flipping to the top of the second page. "Denial
of All Economic Value". If a regulation, if a government
puts a regulation in place that takes all economically viable
use of that property away from that property owner, that is deemed
to be a taking. And that's a pretty easy case. The
best example I can give you is this Lucas v. South Carolina
case that I quote on the top of page 2. Let me give you
just quick facts about this. I think it helps you to kind
of understand these principles when you understand a little bit
of the factual basis of the case. In the Lucas case,
Mr. Lucas actually owned a couple of beachfront lots. The
state of South Carolina decided that they wanted to protect the
shoreline in this particular area and put in place a regulation
to attempt to protect the shoreline from increased commercial
development or residential development along that. And
as part of that regulation, the two lots that Mr. Lucas had acquired
could no longer be built on. He couldn't build a permanent
structure, a house, a beach house, which is what was his intent
in acquiring those two beachfront lots. The State of Carolina
defended themselves by saying, we're not saying that you can't
use your property. You can put a picnic bench on it, you
can camp on it, you can entertain guests on it. You can
do a lot of things, we just don't want you to put a physical
improvement such a house on that property. And amazingly
that case went all the way up to the U.S. Supreme Court before
the U.S. Supreme Court said, No, that's a taking of that person's
property rights. There's no economically viable use of
that property. Therefore, Mr. Lucas, you get compensated
for your beachfront lots. So that's the easier case, the
denial of all economic.
"Denial of Nearly All Economic Value", that's the tougher
case and that's the case that I'm going to punt to Frank to spend
a little more time on. But I will give you the rules of
the game. And I quoted them for you there. The Pennsylvania
Coal case really is the, again, seminal U.S. Supreme Court
case on it. And what they basically said is, if a regulation
so decreases the value of property that there is very little
economic value, the court will do a balancing test and they'll
balance really three factors. "The social goals to
be promoted." So what is the goal of government in
that regulation? And how important is that societal goal?
Second is diminution in value to the property owner. How
diminished was the property? And then third was the owner's
reasonable expectation regarding the use of the property.
Again, reasonable expectation. That doesn't necessarily
mean putting a high rise office building in the middle of a residential
community. So, I gave you sort of the general rule, again
from the Pennsylvania Coal case. Generally a regulation
will be found to be a taking only if it unjustly reduces the
economic value of the property, i.e., if it either greatly reduces
the value and only slightly promotes some public welfare.
Okay? So that's the general balancing test that is applied
in all the cases that then follow Pennsylvania Coal, and
that is going to be what I'm going to punt over to Frank to spend
a little more time on.
Okay, if it's a taking, if it's deemed, if the regulation is
deemed by a court to be a taking, what happens? Well, you
get just compensation for that. What does that mean, what
is just compensation? Interesting enough, the Arizona Constitution
is actually a little different on this point than the U.S. Constitution.
(Sorry, I will put it closer again.) The Arizona Constitution
actually refers to monetary compensation. And this came
up in a case just 10 years or so ago, the Corrigan v. City
of Scottsdale case, where the city of Scottsdale tried to
put in place something called ESLO, the Environmentally Sensitive
Land Ordinance. Actually it was the predecessor to it now
which was actually a hillside ordinance at the time. And
on that hillside ordinance that they adopted, they said okay,
Mrs. Corrigan, you and your family own the side of the McDowell
Mountains and all the way up onto the top of the McDowell Mountains.
We're going to push you down. We're going to say under
our hillside slope ordinance, you can't develop up above a certain
slope. But that's okay because as compensation to you,
we're going to push the density down onto your lower flatter
lands that you hold down in the foothills of the McDowell Mountains
in Scottsdale. And the court said, no, sorry, that under
our Arizona Constitution, density transfer or giving increased
density rights in certain areas is not sufficient just compensation.
It might be under the U.S. Constitution, I'd be interested in
Frank's view of that, but under the state constitution, because
our language is a little bit different and it refers to monetary
compensation, that's the kind of compensation that needs to then
go to the property owner. So that's the bottom of
page 2.
Top of page 3, I gave you the two most recent takings cases.
The Palazzolo case was an interesting case where the fact
that the person acquired the property after the ordinance went
into effect, that Rhode Island used as their defense. That
this person bought knowing that this regulation was going to
apply to the property and you wouldn't be able to build on the
property the way that you thought you could build on it.
And the court said, no, sorry, that the petitioner's claim for
taking is not barred by the fact that title was acquired afterwards.
But the facts of that case are very interesting. I'm going
to leave this one to Frank also because it has to do with this
idea of being able to split a parcel. What happens if you've
got a large parcel, you can develop on part of it but government
says you can't develop on other parts of that land and what does
that mean. I think Frank will spend a little time on the
Palazzolo case there.
The final more recent case I gave you is the Tahoe-Sierra
Preservation Council, the Lake Tahoe case where there was
a moratorium in place for 32 months and the property owner said,
look, if you put a moratorium on my ability to build a house
for that long a period of time, surely that's got to be a taking.
If I can't use my property for that long a period of time.
And the court said, no, we're not willing to say what the time
period is. Yeah, maybe at some point a moratorium becomes
a taking, but in this case they found that not to be a taking
in the Lake Tahoe case. Footnote to that, we do have in
Arizona actually a moratorium statute that the legislature put
in place 6 years ago that regulates the ability to put into place
planning moratoriums and infrastructure moratoriums, and so we
actually have statutory law that would override this case anyway.
Okay, the next, that Roman numeral V, "Unconstitutional
Exactions and Conditions". This is a situation where
government isn't putting a regulation in place saying you can't
use your property in a particular way, but this situation is
government is saying, okay, I'm giving you a permit, I'm giving
you a plat approval or I'm giving you zoning approval, but as
part of that I want to take something from you, property owner.
I want you to dedicate something to us. And the best example
is you've got a subdivision and the local city says, yes, I'll
approve your subdivision plat but I want a 40 acre regional park
to be dedicated as part of the subdivision. The property
owner says, wait a minute, that's unfair, that's far more than
I should have to give than the property. There are two
seminal cases that go to this. One is the Nolan v. California
Coastal Commission and the second is the Dolan case.
And the basic rule is something that frankly we've had in place
in Arizona for almost 25 years now, under the Transamerica
v. City of Tucson case, it's actually a case that came out
of the city of Tucson from 25 years ago and it's a pretty simple
rule. There has to be a nexus between what government is
asking for and the burdens put on government by the project that
they're approving. So there has to be some connection.
In other words, if the government is saying to the property owner,
dedicate this road improvement, that's okay because the development
project is going to serve that road. The development project
is going to dump traffic onto that road. And so there's
a nexus between what the government is asking you to give and
the development project. But then secondly it has to be
roughly in proportion to the impact of that project. There
has to be some proportionality there. And that's where
that 40 acre regional park comes in. If it's a several
thousand acre master planned community and government is saying,
give up a 40 acre regional park, you know, that's probably proportional.
If it's a little 40 acre subdivision plat and government is saying,
give up a 10 acre park for that that's going to serve a much
larger area, that may not be in proportion. So that's the
rules of exaction in Arizona.
Final is "Vested Rights". And I saw this from
your materials that people were questioning, you know, when do
you actually have a right to the zoning that you have in place.
That is the vested rights rules. There's actually although
a lot of similarity between takings law and vested rights law,
they're really a different line of cases to the courts.
Arizona, like most western states, has a pretty tough vesting
law in Arizona. It's fairly "draconian", I like
to say where it's pretty tough to show that you have a vested
right in your zoning. The rule of law is that you have
to have gone out and received some kind of building permit, some
kind of approval. It might be a building permit, it might
be a subdivision plat, it could be a special permit which is
the Paradise Valley situation. But you've received some
approval of government to take some action and then you've actually
taken action in reliance on that permit. You've actually
gone out and started to grade the property. Or you've put
down a foundation for the structure that you're going to build.
Once you've done that, once you've gotten your permit, once you've
acted in reliance on that permit in good faith, meaning that
you haven't done this in sort of the night where you're trying
to avoid some other government regulationyou know is coming down,
if you have done those things in good faith, then you have vested
your zoning. You have a right to finish that project that
you've started. It's kind of an equitable principle and
it does make sense. If someone buys a piece of land, gets
it zoned, goes to government and gets a permit, spends a bunch
of money then in reliance on that permit and then government
tries to change the rules of the game or pull the rug out from
under that developer or that property owner, at that point the
court will say, no, you're vested and you have a vested right
to finish that project. Where it intersects with takings
law is, if you do have that vested right and then government
still applies the regulation, stops the project, stops your ability
to put it to that economic use, then that will in fact create
a taking of that person's property rights and that person then
gets due compensation or just compensation. So that's the
common law of vested rights.
I did give you, on the final page of the outline there are two
additional ways of establishing a protected development right
or vested right. Of course first is common law as I mentioned,
the spending substantial sums of money in reliance on a permit.
But the second is a development agreement. That under Arizona
law for the last 12 years we've had a statute in Arizona that
allows a property owner to sit down across the table with a local
governmental entity and negotiate a development agreement.
There's got to be good faith bargaining across the table.
The developer or the property owner needs to be giving something
to local government that local government wouldn't otherwise
be receiving. It might be completion of additional infrastructure
items, dedication of additional improvements, building things
ahead of schedule, building things and over-sizing improvements
for the local government that they would like to see happen.
And then in exchange for that, the local government can give
back to the developer a contractual vested right or a contractual
property right. As long as, again, it's enunciated in that
development agreement.
And then the third way of establishing a vested right that could
come into play as you're discussing this plan in Pima County
is a statutory protected development right. Again, the
Arizona legislature several years ago, I guess it was 6, 7 years
ago now, recognized that under common law it's rather difficult
to establish a vested right and in not every case do you want
to sit down and negotiate a development agreement and so there
ought to be an opportunity for local government to give a statutory
protected development right. And there's actually a statute
in Arizona that does that, it requires the local government to
adopt an ordinance to give these protected development rights.
They are only for a fairly short period of time. The intent
of the legislature was to give a developer 3 years or 5 years
or a relatively short window of time to get the project up and
going where they can go out and finish their design work, go
out and get their financing from their lender, from the financial
institution, and get the project in the ground without fear of
the rug being pulled out from under them or the rules of the
game being changed. And so for those short periods of time
local government can give this protected development right to
the developer.
So that's my overview of takings law and vested rights law and
I will at this point punt it to Frank and then of course I will
be enjoying hopefully the questions and answers that we'll have
as we get further into the dialogue.
Frank Bangs: Two general comments about the handouts.
Steve has provided you with an excellent summary of the issues
that David identified as of interest to the Steering Committee.
I provided what might be called the illustrated "cheat sheet"
to go along with it, that's the one page little chart.
And what it does is illustrate the federal takings law principles
that Steve so well described in his written handout. And
you'll see the basic federal rules as expressed in the Agins
and Penn Central decisions. And then the more recent
pronouncements by the U.S. Supreme Court in Loretto and
Lucas about what are called categorical or per se takings.
And then what I really, Steve, think of as sort of a special
subset of takings law, the rules that deal with exactions.
Special subset because on their face, exactions would be a taking.
So we have to create a rationale to protect them.
I wanted to talk about two decisions which in my mind raise questions
that are unanswered because in both of these cases, as so often
is the case with takings litigation, in both of these cases they
were ultimately settled by the governmental and private parties.
And so we don't really have a final trial court ?? of what occurred.
But the first case Steve referred to is the Corrigan case,
the Scottsdale hillsides takings case. And in it we have
an expression of one of the most important questions in takings
law: What is the property that we're focusing on for purposes
of the takings determination? And in Corrigan, the
Court of Appeals was looking at 5,000 acres in the McDowell Mountains.
The City of Scottsdale had zoned a portion of that 5,000 acres,
a relatively small portion, to no development at all. For
Pima County folks it would be the equivalent of the Peaks and
Ridges provision in our HDZ regulations. And the court
looked at that and they said, well, gee, we see two zones.
We see something which Scottsdale sadly in hindsight called the
"no development zone", which was the Peaks and Ridges
areas. And you don't allow anything to happen there.
And then we had this other zone where some development can occur
depending a number of factors. But we're going to choose
the focus just on the "no development zone" and that
looks like a taking to us. And so the property that the
court focused on for the determination was this relatively small
portion of 5,000 acres. If you looked at the property as
a whole, if you looked at all of the DC Ranch, the City argued
and the trial judge accepted as a matter of law that the property
was more valuable after the application of the city's density
transfer mechanism from the "no development zone" to
the balance of the property than it was before, and found that
there was no taking. So this is one of the key issues in
the takings determination. What is the property?
Are we going to do as I believe federal case law and the Palazzolo
case that Steve referred to earlier requires that we look at
the property as a whole rather than focusing on discrete parts
of it?
The second Arizona case is Ranch 57 v. The City and County
of Yuma. That's an airport approach zone takings case
and the plaintiff in that case had purchased some existing orange
groves for future industrial development. At the time of
purchase it was zoned industrial and the plaintiff, the owner,
paid the going market price for industrially zoned property.
Subsequently the City of Yuma imposed airport regulations and
this land, unfortunately for Ranch 57, was in effectively a clear
zone. And the regulation said, well, you can continue to
grow orange trees on this property, but you can't build anything
on it. The case went up to the Court of Appeals and they
went through essentially the Penn Central balancing test
that you have on the cheat sheet. And they focused on the
economic impact of the action and the notion of interference
with investment-backed expectations. And the court in Ranch
57 says, well, when we're talking about the denial of all
viable economic use, we think that should be tied to the question
of whether or not the owner has been able to achieve a reasonable
economic return on its investment. Now remember, Ranch
57, they weren't in the fortuitous position of having been an
orange, you know, farmer and then as city of Yuma grew around
them their land suddenly became more valuable for industrial
purposes. Instead, Ranch 57's investment-backed expectation
was industrial use. Ranch 57 was subsequently settled,
as was court between the local government and the property owner.
We don't know what would have happened in those instances.
But I just make those notes about the Arizona case law that aren't
fully explored in Steve's terrific overview.
Second general point I'd like to make, and that is the distinction
between legislation and litigation. Steve and I have been
talking about court-made rules applying the U.S. and state constitutions
to local regulations. But in the SDCP and what this Steering
Committee does, this is legislating. And although the court-made
rules can provide some guidance about what the minimum constitutional
standards are going to be, they're not straight-jackets, they're
not limiting factors in what the local government may choose
to do. And Steve has provided us with some perfect examples
of this, as he pointed out in both the vestings area and in the
moratorium, where through legislation the State of Arizona has
gone beyond the minimum standards that the courts, the constitutional
standards of the courts. I'm not personally advocating
that one way or another. I'm just saying as the Steering
Committee, David, goes forward in its deliberation, remember
that you are standing in for a local governing body and you have
a broad range of choices that are available to you in how you
solve problems. Particularly the issue that I see David
raised by your, under the partial takings, the pro/con where
you say, "the beneficiaries of regulatory action that increase
value should be required to pay for that increased value".
Steve may want to comment on this. A lot of my municipal
clients have said, well, gee, Frank, doesn't Corrigan
tell us that we can't use TDR's, that they're constitutionally
suspect? And even before the legislature affirmed that
as part of Growing Smarter and other legislation that they can
be used, my advice to them was, "no". Because
I think the Court of Appeals in Corrigan was thinking
about the, if you will, below the bottom line. You've got
two questions in any takings case. One, is there a regulatory
taking? And then, since Corrigan in Arizona and
the federal decisions, well then what's the remedy, which is
just compensation for a partial taking. But above the line,
I think TDR's must be taken into consideration in determining
whether or not there's a taking in the first place. So
that if the property owner has a mechanism to ameliorate the
impact of the regulation, if the legislation provides that.
My opinion is that that's going to have, that should be taken
into consideration in the takings determination.
Mark Ebbin: Well, Frank and Steve, that was very helpful
to me. I really enjoyed the talk and a great overview,
I think, of the 5th Amendment takings laws both at state and
federal level. It's funny because as I advise a number
of these processes, these exact same issues come up repeatedly,
as everyone can imagine. And I think this discussion that
you're having is exceedingly important in terms of starting to
think about what the parameters are that you're going to be working
within in terms of trying to structure a plan that not only meets
the regulatory requirements but does so in a manner that's equitable
and fair to the property owners who are affected by the plan.
And I think that what I have found, and again one of the dangers,
of course, of stepping in cold to a discussion such as this one
is that you don't quite know where the debate has been so far
and where it's going and where things have been settled and where
things haven't been. But it's interesting to sort of hear
through my discussions with David and others some of the issues
that you are grappling with and how similar they are to what's
been thought through and talked about and discussed in a number
of these regional HCP processes.
One of the things that, and again, I can sort of move in a couple
different directions here. I can sort of pick up where
Frank left off in terms of cases that have involved the ESA and
talk a little bit about that. But frankly I think what
may be more helpful and of perhaps greater interest to the group,
but tell me if I'm wrong, is to talk a little bit about how the
5th Amendment issues have actually interfaced with ESA HCP processes.
Particularly at the regional level which is where I think it's
most valuable to kind of discuss in that context. One of
the things that I've found through watching these debates sort
of play out is that ultimately it becomes fairly apparent that
trying to find the line as to what is a takings and what isn't,
which activities or which approaches within a regional plan are
likely to trigger takings conflicts and those that aren't, starts
after awhile to look like the debate and the discussions that
have taken place for the last hundred years on this issue.
The evolution of thinking within the courts has been very interesting,
as you probably are starting to gather from the discussion that
Frank and Steve had with you. And you can see that the
lines have started to go off in different directions. Factors
have played in and out of the debate. And there is a healthy
discussion that continues on to today, particularly within the
academic community, as to what all these cases really mean and
where are the courts going and what standards have now been discarded
and which standards are surviving. And what I've found
to be valuable is that once these issues are sort of put on the
table, rather than trying to find the line and structure your
HCP to precisely follow those lines, where more I think constructive
outcome has been is where a common sense approach to handling
these issues kind of replaces that discussion with some basic
parameters and some broad policy goals that everyone can agree
with.
For instance, what typically happens is that most folks who are
involved in these processes start to recognize that really what
you're trying to do here is create a fair and equitable process,
that where no one landowner or no one class of landowner starts
to take on a much bigger burden than everybody else. And
typically the class of landowners who are most vulnerable to
being, and it's inadvertent in most cases, but inadvertently
put in a position of shouldering sort of an inequitable burden
through these processes are the small guys. Are the guys
who have, you know, small parcels, don't necessarily have grand
plans in terms of what they want to do with those particular
parcels but end up being sort of caught in the gears of a much
larger process. And you know, in some of the cases I've
been involved in, those guys sort of get labeled the "poor
schmuck" class. And we kind of want to help the guy
who gets ground up inadvertently through larger processes, ends
up with very few opportunities on the land and then really starts
to be put in a position where his only recourse is to start to
think about challenging the program based on 5th Amendment jurisprudence.
So what we have found is that there are a range of different
approaches that have been integrated and incorporated into these
planning efforts that have pretty much successfully dealt with
these issues and have put these HCP's on pretty solid footing
legally. Let me just say, first of all, just by the nature
of how these processes ultimately are permitted, you very rarely
see an HCP that ultimately doesn't get permitted. And what
that translates into is that accommodation usually rules the
day. Where it may be accommodation that comes after a long
hard discussion with the regulatory agencies but ultimately comes
to the point where some kind of outcome is acceptable from both
standpoints and a permit is issued. And consequently what
you see is almost no successful takings challenges related to
ESA compliance. I'm sure there's a lot of views about why
that's the case, but I think that it can't be ignored that one
of the likely factors for that is that accommodation ultimately
is reached.
When you put this in the context of a regional planning effort
where you have far more room for flexibility, far more room for
creativity to think about these issues up front, the prospects
for successful challenge of these HCP's is reduced even more
so. And I don't know of a single instance where a regional
HCP has been successfully challenged based on, you know, a 5th
Amendment claim. And so we're really, and again I think
that one of the reasons for this is not only the ultimately permitting
of these HCP's, but in the regional context again the thoughtfulness
that has gone into the development of the plan based on the kind
of discussions that you're having here today.
What we have seen is, for instance, when you look at the regional
context, that there are enormous possibilities in terms of structuring
the plans to again anticipate these kinds of issues, particularly
as they may affect small landowners. For instance, in some
cases you may have an acquisition fund that's been created to
provide compensation to landowners who you just can't find any
particular way under the plan to allow for some use of that property.
So these small landowner funds have been very effective in terms
of addressing very rare and unusual circumstance that may arise
in a regional context. There is, in some plans, variance
processes that look very similar to the variance process that
local governments typically use in the context of local land
use planning whereby there's a defined set of circumstances that
if a particular landowner meets those circumstances, there is
accommodation for particular uses as are anticipated as part
of the overall plan. There are plans that have tried to
address these issues by creating a class of landowners.
And again, usually very small landowners, say less than 5 acres
or less than 10 acres, where outright exemptions have been given
or at least some kind of reduced obligation where again, in the
context of a region, the effect of creating that class can be
analyzed from the standpoint of the conservation goals of the
program.
There are other techniques, such as creating preserves, regional
preserves for the multiple species that are covered by the plan
that are not preserves that envision absolutely no impacts.
But rather are preserves that are designed to allow for some
level of impact to occur. What that provides is the flexibility
for those landowners who again are caught in awkward positions
under the plan to carry out certain activities that otherwise
might not be allowable.
There was a discussion earlier about vested rights and what that
means. In certain HCP's the context of vested rights as
it's defined within the state is applied to projects that end
up in a category that are treated differently than projects that
do not have vested rights or are not pipeline projects.
So that projects that again have gone down the path far enough
that there is a decision made in the context of the plan to allow
for those projects to either proceed outright or under a set
of requirements that are different from requirements that might
be imposed on projects that haven't received those levels of
entitlements. In California here there is a degree of a
safety net involved in those particular class of projects because
of the California Environmental Quality Act which each of those
projects will have already gone through, already provides for
some level of protection and conservation measures for the species
that are being covered in the context of the regional plan.
So there's again a bit of a cushion to allow for a different
treatment of vested projects than those that aren't vested.
In other plans there has been focus on what the effect of regional
plans may be on limiting the ability for property owners to engage
in agricultural activities or to convert their lands into agricultural
activities. And what we have seen is in some places there
are thresholds that have been, and again this can apply beyond
ag, but I've seen it in agricultural context where threshold
levels have been established that allow for, you know, a certain
amount of conversion to take place that is anticipated over a
certain period of time that provides some level of comfort that
most agricultural activities will be able to proceed unimpeded.
And again, another technique has been to put in place abbreviated
procedures that allow for small property owners to at least move
through the process in a faster timeframe and again oftentimes
with reduced obligations or exemptions outright. So again
I put these out there to illustrate that, you know, there are
mechanisms that have been thought through that can affect the
design of your HCP that anticipate a lot of the issues that are
being bandied about in the court cases that Frank and Steve laid
out for you. In the context of the ESA, the cases that
are out there again are not focused on what issues arise in the
context of regional planning. They typically are focused
on issues that arise where the Fish & Wildlife Service and
the landowner have been unable to reach the accommodation that
I started out talking about where the landowner's been not satisfied
with the demands of the Service, or in the case where the Service
has not been willing to agree to permit a particular activity.
And in those circumstances the courts have analyzed these cases
in the exact same way as the analysis plays out in the context
of a whole bunch of other land use decisions that local, state
and federal governments made. So again I just wanted to
create a landscape here of how some of these issues have been
dealt with elsewhere, where the flexibility might reside in terms
of avoiding these conflicts in the first place.
Questions from the Steering Committee
Question: What does the "or damaged" clause
in the Arizona Constitution mean and how does it make our provisions
different from the federal 5th Amendment?
Frank: . Let's suppose that government is constructing
a roadway and it intersects an existing drainage way watercourse.
They need some additional land for the abutments for this culvert
or bridge on which they're going to build part of their drainage
structure. They decide that they actually must physically
acquire private land in order to construct that facility.
That's clearly a taking. We're going to transfer title
from the owner to the government in order to construct a public
facility. Same fact situation, the culvert is built but
it turns out that its design was faulty. As a result the
water dams up behind the culvert and the roadway doesn't function
properly and the upstream property owners' field, cotton field,
a quarter of it becomes unusable, at least during the wet times
of the year, for the growing of crops. Well, government
hasn't physically come in and acquired the land for some public
use, but the landowner can argue that its actions in constructing
of a public facility on its own right of way have damaged the
adjoining property and they ought to be entitled to compensation.
And the classic way of doing that was through an inverse condemnation
method.
Question: Why am I entitled to compensation under the
constitution if principles of vested rights say that I don't
have a vested right unless I have a permit?
Frank: For purposes of the 5th Amendment taking clause
and its Arizona Constitutional equivalent, we may be able to
make a claim that a regulation has affected a regulatory taking
even though we don't have a present permit to develop under the
existing zoning. Just as in a converse situation, if government
took our land under its ability of eminent domain power and was
paying us money, the zoning and its future use would be taken
into consideration in determining the value of the property taken.
The vested rights situation is a different principle. It
says basically are there situations in which we will disregard
as a legal matter the fact that a regulation has changed.
Day One I could do "X". Day Two, a new law has
come into effect and I cannot. And all the vested rights
are is a sort of a principle of fair dealing in the courts that
say there are fact situations in which we're going to say on
Day Two you can proceed with your development plans because otherwise
it would be grossly unfair in a legal sense to do so. Steve,
I'm going to let you take the Growing Smarter question.
Steve: . I like to look at the difference between
vesting and takings analysis as to the remedy. In a taking
scenario where government says you can't build a house there
at all, you have no economically viable, you get compensation.
You get some monetary damages given to you. You get money,
yeah, basically. Under vesting analysis the remedy is grandfathering.
You're grandfathered from the effect of that ordinance.
Government doesn't have to pay any money. It's just that
you get the right to finish the project, to go ahead and build
the house that you started or the commercial project that you
invested in in property. So I like to view it a little
bit as to what is it that you're looking for or what is it that
government's willing to give you. Are they willing to grandfather
you, say you have a vested right therefore you're grandfathered
from the effect of this. Or are they willing to say, stop,
no, you can't finish the project, you can't do anything there,
but we'll compensate you instead, we'll give you money, is the
difference.
Marc: : I think it's important to recognize that
there is a difference between how the state would treat vested
rights, of course, and how federal regulation might address vested
rights. And under the federal takings jurisprudence, there
is flexibility on the part of the federal government to impose
additional regulatory requirements that might conflict with the
vested rights that are obtained locally. And so it's that
particular intersect where there's not quite the level of certainty
for the landowner that they might otherwise have in dealing directly
and only with the local government.
Question: Under Growing Smarter there's a provision
that says something to the effect of if county government creates
an open space zoning category or an agricultural category zoning
and they put my property in that, that they have to leave me
a residual one-home-per-acre density. Is that a zoning,
is that a vested right? Am I entitled to that under the
state statute?
Steve: The Growing Smarter provision you're referring
to I refer to as the "Rusty Bowers Clause". Senator
Rusty Bowers, who was majority leader of the Senate at the time
Growing Smarter Plus was going to the legislature in the 2000
session, it was Senator Bowers who negotiated to put that provision
in that you're referring to. He noted at the time to Governor
Hull and to her advisors that what we had done in Growing Smarter,
what we were proposing to do in the Growing Smarter Plus, is
to take our general plans and comprehensive plans of cities and
counties and put in place a strict conformity requirement.
You had to strictly conform to that plan. So if the plan
shows residential and you want to put something commercial there,
sorry, you can't do it unless you go in and amend the plan.
Because these plans were going to mean something for once and
for all.
His point was that under Growing Smarter Plus, we were going
to ask local governments to add into their general plans and
add into their comprehensive plans open space plans. Identify
areas where you would like to set aside open space. And
Senator Bowers pointed out what could happen when you apply those
two ideas together. That local government could designate
an area as open space. There may be private lands in there
and that private landowner then has no use of the land other
than open space and that would be a takings under all the principles
that we've been talking about. And Senator Bowers said
we have to prevent that scenario where local government, in creating
their open space plans within their general plan or comprehensive
plan, that they designate someone's private property as open
space, permanent open space. Or he added agriculture to
it too because of the Ranch 57 case and some of the other
cases he was familiar with where he didn't believe that agriculture
was a legitimate economically viable use in Arizona given
the marketplace.
And so his remedy was to say, okay, local government, if you're
going to designate someone's private property as open space on
your plan, you have a choice. You can either go get the
permission of that property owner. If the property owner
wants to allow their land to be designated as open space, that's
fine. Or if you can't get the permission of the property
owner then you have to give them what he referred to as a default
zoning or default designation on the plan. Something that
they can fall back on if they can't get the permission of the
property owner. In his mind, the default zone was R-43,
basically one acre per lot zoning was in his mind the default.
The baseline zone that someone should be able to get. And
he was told by his advisers, some of the lawyers in the Senate
at the time, that most communities, most cities recognized R-43,
one acre zoning, as their holding zone or their default zone.
Now he was wrong about that, as we know, there's 5 acre zoning
designations all around the state also, but he chose that one
unit per acre zoning designation. So the way that clause
currently reads is that if a local government, in their comprehensive
plan if you're a county or general plan if you're a city, if
you designate someone's private property as open space, you'd
either have to get the permission of that property owner or you
have to give them an alternative land use category of one unit
per acre. That's the so-called "Rusty Bowers Clause".
Question: In the context of the 5th Amendment, what constitutes
legitimate public use, and conversely, what is not legitimate
public use?
Frank: Actually, that question, what is legitimate
public use, raises something which I had written some notes to
myself during the questioning to bring up and you allow me to
raise it. You'll note in both the Agins test and
in the Penn Central test, the first issue is whether or
not the regulation is, it was described in Agins, "substantially
advance(s) a legitimate state interest", and then in Penn
Central, what's the character of the governmental action?
It's my experience, and I welcome Steve and Mark's thoughts about
this. It's my experience that the closer the government
is to traditional health, safety and welfare objectives, the
more likely the regulation is to be upheld against a taking challenge.
Now the example, Steve, I would point to in Arizona is, I never
can remember, it's like Catalina Savings & Loan, Phoenix
Savings & Loan, Court of Appeals case. The City of
Phoenix had a provision in its building codes which most cities,
I think Tucson has one too, that said that not only are we going
to require sprinkler systems in high rise buildings prospectively,
the traditional way in which police power regulations are applied,
but also as to preexisting buildings, we want you to bring them
into conformity with our sprinkler system law and we'll give
you some time to do so but eventually we want all high rise buildings
in downtown Phoenix to be sprinklered. And the owners of
a building in Phoenix challenged it on 5th Amendment Arizona
Constitutional basis, and they said, you know, we can't do this.
The cost of sprinklering this building that was built in the
20's or 30's or whatever the heck it was would be so astronomical
given the market rent that we can expect to receive the property,
we'll never get a return on it. We might as well tear the
building down, it no longer has any value to us. And the
court responded and said, you know, this isn't the regulatory,
I mean, it was, but they said, we don't see this as like that
Corrigan case and those other traditional, this is a traditional
health, safety, welfare regulation, we're protecting people from
burning up in high rise buildings. And so they just tossed
it out. There wasn't any question of compensate, we're
not going to do this, we're not going to reach number 2, the
economic impact of the action or interference with investment-backed
expectations. We're not even going to reach that.
And so to turn it back over to the area that is more closer to
the SDCP and the thing here, I mean, floodplain regulations typically
have a provision that describes the "flood way zone",
sometimes it describes, where no development is permitted.
This is where the bulk of the waters go during the 100 year event.
So you could theoretically have a property owner, all of his
land lay within the flood way zone, who had no development query.
Well, isn't that a Lucas, aren't we in a per se taking?
Wouldn't you be, yeah, a "purse church"(?) kind of
situation? And I'd be, having now laid out those facts
in that question, I'm going to turn it over to Steve and Mark
who can respond to it. But generally speaking for the audience,
the closer you are, the more that you have those traditional
health, safety and welfare objectives, the more likely you are
to have your regulation pass certainly the first test and I think
then in the courts' minds survive the takings challenge on the
second, the other parts of it.
Steve: Yeah, I don't think I've ever seen a case
where it was thrown out on the basis that what the government
was trying to do was illegitimate. I've never seen a case
where they've defended ?? But it's a sliding scale.
As I said on the second page of the outline, they take the 3,
under the Penn Central case, they take those 3 standards
and they balance them against each other. So if the government
regulation has a very strong societal goal, and the exact example,
I was going to use the same one Frank gave which was the floodplain.
A societal goal of keeping people from getting washed out and
killed in a flood scenario, then they don't need as much to look
at the latter two. But where the first, where the societal
goal is aesthetics, for instance, then they're going to look
a little harder at the diminution in value and the reasonable
expectation that the property owner had. So I don't know
that I can think of an illegitimate public use, but how strong
that societal goal is will impact how much the court will look
at the next two prongs of the test.
Mark: I think Steve is exactly right. I haven't
seen an illegitimate public use as well. In fact, when
you look at decisions out of the 9th Circuit, they've got a very
broad idea of what health, safety and welfare is as well as most
other Circuits. And I have, I agree that I think where
it really ends up coming into play is on the balancing test.
And really, in a very unscientific manner, sort of moves the
courts, where there is questionable legitimacy, moves the courts
to focus more on the other factors.
Steve: Actually I apologize, I just thought of one,
and Frank, you'll laugh at this one, too. It's up before
the Arizona Appellate Courts as we speak. A group called
the Institute for Justice, which is sort of a conservative legal
organization, has challenged Mesa's taking of someone's property
to give it to another developer. It's a redevelopment area
and Mesa wants to redevelop a portion of their downtown area.
Mesa has proposed to condemn, to take, a gas station repair shop
owner his property, take it away from him to give it to another
developer to develop a better project. And in that case,
that's exactly what they're arguing, they're arguing that's not
a legitimate function of government to take someone's property
just to give it to somebody else to develop something else.
And that's being argued today.
Question: Has there been any case law where someone has
said they expected to develop a property or have a certain economic
use and then something like a HCP came up or a hillside ordinance
and their return was diminished supposedly because of that, that
they've gotten damages?
Steve: Most of these, rarely do actually damages get awarded.
Rarely do you see the situation where you take a takings case
all the way through the process and in the end, you know, city
"X", you pay $2 million. What normally happens
is as you take it through the court process, if the local government
finds out that they're going to get hit with damages, then they
settle it. And they settle it by usually giving them either
some kind of grandfathered right or giving them some other kind
of development compensation. As Frank indicated in the
Corrigan/Marley(?) case, DC Ranch is the result of that,
that the City of Scottsdale ended up negotiating a development
agreement with the Corrigan family that allowed them to develop
the DC Ranch project as compensation for the fact that they had
won the takings case. You see that happen and Ranch
57 was settled similarly. So you oftentimes see government
coming to some kind of accommodation.
Question: Under the Corrigan case, why was the
property more valuable after the no build zone than before?
Frank: Because at the time the hillside regulations
were imposed on the 5,000 acre DC Ranch, it was uniformly, if
you can imagine, one acre zoning over the entire property.
Some portions of it, the mountains, the cost of developing that
area would have been tremendous. To put roads and infrastructure
up into these sometimes sheer mountain precipices. Other
portions of the property that lent themselves physically to development,
the lower flatter areas, could be serviced by and the densities
increased over the one acre zoning easily. So by allowing
that owner to transfer the unusable density from the peaks and
ridges to the lower areas where it could actually return on the
investment made the property, the court felt, even more valuable
after the regulation than before the regulation. In other
words, the TDR, the transferable development right concept, actually
created value for the property owner and it compensated for the
no development imposition on the peaks and ridges.
Question: Under this HCP, would all projects that I do
as my ranching operation have a federal nexus on them?
So that when I put a pipeline in or when I do any fencing or
anything like that, am I now under federal regulation?
Marc: It's a good question. And I think the
way that it helps to look at it is that there are, there's this
law out there that already exists of which species are protected
under the law by being put on a list. And in a case here
you have one or more species that are now protected by the federal
Endangered SpeciesAct. And the idea behind the HCP is to
provide a mechanism by which activities, whether they are ranching
activities or development activities or other agricultural activities,
municipal activities, can proceed without violating the law.
And the HCP process is generally a process by which activities
are considered and analyzed in the context of what their effect
may be on these species and an outcome is reached by which those
activities can continue to proceed be it with some terms and
conditions and that the conservation requirements for the species
can still be met. So the goal of the HCP is to allow for
you to continue on with those activities with some certainty
that you are not running up against a federal regulation and
that you have certainty knowing that you can proceed with these
activities for the life of the permit that you have in hand.
So the HCP doesn't federalize your activities or create a new
federal nexus that doesn't already exist. It merely provides
a way for you to be able to continue on with the assurance that
these activities are going to be in compliance with this federal
regulation.
Question: The Sonoran Desert Conservation Plan goes beyond
a Section 10. A Section 10 I can understand. But
they have gone beyond that and made designations of biological
cores and preserves and things of that nature, and that's all
part of this HCP. And they don't necessarily have anything
to do with an endangered species.
Mark: Well, that's a piece of this process that
I'm not familiar with, so I can't really comment on it.
But again, what is oftentimes the goal of these regional plans
is to afford landowners protections for not only species that
are currently listed or protected, but those that are likely
to be listed in the future, and to give, in a sense, an insurance
policy such that the landowners do not have to confront these
issues again in the future as species are added to the list over
time. Again, I don't know the specifics of your circumstances,
but again, from a broader perspective, the goal is to be able
to provide you with a means to carry on with your activities
in compliance with ESA, not only as it affects species that again
are currently protected, but ones that are likely to ultimately
receive the protection of the Act.
Frank: This question raises a thought that Steve and I
had and we don't know the answer of and we're going to pass it
on to Mark. Mark, under current Arizona enabling law for
counties, certain activities are exempt from zoning, from county
zoning, including agricultural, mining, metallurgic and anyway,
agricultural uses are currently exempt. Can the adoption
of an HCP vest the county with more authority than it already
has under state law? Maybe that was part of the question,
is my property to become federalized, as I understood that question.
Marc: You know, that issue has come up in California
and other places that I've worked, including Colorado.
And I think the short answer is no, that to the extent that an
HCP in a regional context involves issuing a permit to a local
government who then bestows the entitlements under the permit
to landowners by, in a sense, implementing the terms and conditions
of the plan through a local land use planning process.
Under that scenario, it would be very difficult to afford the
local government the Section 10 permit to cover activities that
are not within their local land use planning control or authority.
So I think that from a structural standpoint, the scenario you
described would be very, very difficult to figure out a way to
accommodate, given the limitations on the land use planning authority.
What would be an alternative strategy under such a scenario would
be to structure a plan such that Section 10 permits are available
to each and every landowner that participates, such that landowners
who are involved in activities that are not subject to the control
of the local governments would still have the option to benefit
from those permits by being a permittee themselves. And
there are various ways of structuring that. There are ways
to do it where there is very little additional onus on the individual
landowner to go through a process of obtaining those permits.
The local governments can oftentimes act as a facilitator of
issuing those types of permits, even for the activities that
you described.
AT THIS POINT IN TIME DAVID STEELE NOTED THAT THE MEETING
HAD REACHED THE TIME FOR ADJOURNMENT STATED ON THE AGENDA. THE
STEERING COMMITTEE OPTED TO CONTINUE WITH THE STUDY SESSION.
Question: Please address incorporation of voluntary
alternate dispute mechanisms within the Sonoran Desert Conservation
Plan Steering Committee.
Steve: I wanted to point to something that's
actually in state law that may work to your benefit on this and
I'm not sure you're aware of it. It's a little known provision
in the Growing Smarter Plus Act from the 2000 legislative session
that's called the "takings appeals" statute that went
into effect. What the takings appeals statute said, the
governor and again her advisors as she was helping to put together
this Growing Smarter Act said, you know, we don't want to have
to have people going to court all the time, spending hundreds
of thousands of dollars on lawyers, which Frank and I don't mind
much but it isn't good for profits. We don't want people
spending a hundred thousand dollars and years. And oftentimes
it'll take you a couple of years to get through a takings process
through a court scenario. And so she asked to have put
into the Growing Smarter Plus Act this takings appeal statute.
What it allows a property owner to do is, if a property owner
thinks that a new regulation, and this regulation would apply
under that act, a new regulation has the effect of creating a
takings of that person's property right, the property owner has
the right to appeal to a hearing officer. The hearing officer
is designated by the local government. Oftentimes what
most cities and counties do is end up designating one of their
city attorneys or county attorneys to act as hearing officer.
It provides, it sort of puts the burden of proof (inaudible).
The local government has the burden of demonstrating that in
fact the regulation doesn't have the effect of creating a taking.
So again they look at the same 3 tests that we laid out for Penn
Central, you know, is there a legitimate societal goal, was
there an investment-backed expectation, what's the diminution
in value, that kind of thing is what the takings hearing officer
would in fact look at based on a report that's provided to the
hearing officer from the city or county staff official.
And then the hearing officer makes a decision. And that
decision then And it's a very quick process, a 30 day window
sort of process, which is great. But then that's appealable
to court on a de novo basis, so that you get a fresh trial.
But on an expedited basis to Superior Court, which means you
get a faster hearing before then the Superior Court on it.
The intent of that provision was to essentially force that kind
of mediation that, how Mark referred to the fact that oftentimes
on these takings cases you end up with an accommodation anyway?
Well, instead of spending a year and hundreds of thousands of
dollars to only get to that accommodation, let's push the process
faster to the front end and let's have a hearing officer.
You know, some property owner says, we were putting that through,
said, oh, well, that's a biased hearing officer, it's a hearing
officer appointed by the local government and so I'm not going
to get a fair hearing. Yeah, no. I mean you get the
chance, and we've done this in a few cases already, you get the
chance to present your case, essentially, to a city attorney
or a county attorney and that city attorney or county attorney
has the opportunity to look at it and go, eeh, you know what,
I'm not liking the looks of this when it goes to court, you know?
I'm going advise my client to figure out some accommodation,
either grandfather the project from the effect of the regulation
or give them some other kind of relief.
Marc: I like the idea of these plans incorporating some
kind of process by which landowners in a sense seek an appeal
informally of the local government or the county or whoever's
administering the program. If we're talking about kind
of relationships between the jurisdictional permittee and the
landowners that are within their control and having some kind
of process by which there can be a back and forth, I think that's
a good idea. From the standpoint of the Fish & Wildlife
Service, as long as at the end of the day you have an outcome
that is commensurate with the outcome that's set forth in the
plan, how you get there is really up to you. And I think
I mentioned this earlier. I mean, having some kind of hardship
exemption or some kind of hardship case process that allows landowners
to feel like they have an opportunity to gain an exception for
circumstances that are unfair or burdensome I think goes a long
way in terms of reinforcing the plan and building a level of
comfort among its participants. You know, I think again
it helps a good deal to build into these plans some principles
at least, not sort of a much more refined process, some principles
that define what equity and fairness is supposed to be under
the program. And in the case that there may be an inequitable
situation, how that landowner can seek some redress. That,
I think, is a very useful thing to have built into the plan.
Question: Would the takings appeal process under
Growing Smarter automatically apply to our plan, or should we
or could we or need we take some action under the plan itself
in order to make this process available?
Steve: The takings appeal statute is on the books
today, it's state law. It does apply to any local government
regulation that applies to your property. And so, yes,
it does automatically apply. But as Frank indicated earlier,
and he's right about this, it sets a floor. That's not
to say that you as part of this plan can't enhance that.
But that at least is an arrow in your quiver that can be used
for dispute resolution. You might decide to add to that
state law some other methodologies and/or you might decide a
little bit of flesh to those bones. That statute is fairly
bare-boned in terms of the hearing officer and the process and
all that. You may decide to go in and supplement that statute
in your plan.
Question: Please clarify regulations and overlay zones
and how this affects a landowner's vested rights.
Steve: Certainly if you deny all economic use of the property,
yeah, that's a taking. As I said, in the second part then,
if you deny nearly all or you have a substantial impact on value,
then it's a balancing test. And so we do know those two
things are givens in the law. As, and it's really the second
one that I'm guessing is really going to be more a subject of
your discussion in this plan, where it's more of a balancing
test. As to vested rights, again, the law is that if you
receive some kind of government permission or approval at the
start. It could be a plat, it could be a building permit.
It doesn't have to be too far down the road, but it has to be
some kind of And then you've acted in reliance on that,
that may establish a vested right where then you're grandfathered
or exempt from that particular ordinance. If you don't
have that, if you have zoning but you've never acted to vest
the zoning with a building permit or with your acting in reliance
on that building permit, that doesn't mean that you're home free,
that government can take away all use of that property.
It just means that then you fall back to the takings principles.
Question: There was state legislation last year that said
if a county by a planning or zoning designation diminished 10%
or more of your property value, then a property owner is entitled
to compensation. I understand that that's coming back and
it might move up to 25% . In denial of nearly all economic value
10% or 25% doesn't get anywhere near that threshold. Would a
state law like that be thrown out?
Steve: No, unfortunately, I think this one goes
back to Frank's point earlier. That the Constitution sets
certain minimal sort of thresholds. A legislature can go
above that and there actually are 3 states, I know Oklahoma,
South Dakota and I can't remember now off the top of my head
what the third is, that have adopted diminution in value statutes.
Where they say, where the legislature in those states have said,
I know the constitutional case law says it has to be a substantial
reduction, but we as a state legislature have decided that if
you reduce the value by "X", whatever that number is,
that we've decided that's a statutory taking, that you get compensation.
So to the extent, and you're right, the legislature has, gee
I want to say every year for the last 5 years has looked at this
issue of diminution in value takings statute. Would that
statute be constitutional? Yes, it would, but it hasn't
passed, it's failed each of the last 4 or 5 years. And
a lot of it has to do with how narrow that threshold is.
Question: If the courts were challenged on this would
they stand?
Steve: Yeah, I think Frank indicated earlier it
would stand because the courts, the constitution doesn't say
that local governments can't give or state government can't set
a higher standard than what they're setting. They're setting
a minimal floor and yeah, that kind of a law would be upheld.
Question: Contrary to federal law?
Frank: I agree with Steve and I had mentioned earlier
that the Constitution establishes minimum protections for property
rights and there's nothing to stop the legislature from granting
more. It's conceivable that in doing so the legislature
might run afoul of some other constitutional principle.
And we said an example with that recently in the anti-down-zoning
without the consent of the property owner. The counter-veiling
or the constitutional principle there was that government, the
legislature, cannot delegate its governmental authority to individual
citizens that ain't been elected. I suppose, Steve, this
is playing the "what if" game, you could imagine some
arguments, Carolyn, like the Arizona Constitution, I can't remember
the provision, basically says you can't give away the public
fisk(?). You can't give public money to private individuals.
If you lower the threshold for a, you know, for a "statutory
taking" so low that it amounted to the fact that government
was either (a) preventing any kind of police power regulation
at all statewide, or (b) giving away money to private property
owners, would that run afoul of that other constitutional provision?
Possibly. Who knows? I mean, I don't know.
But it depends. I guess I'm just saying is there are always
going to be extreme limits where you're going to have some kind
of, something that's going to swing it back into balance if it
reaches too far.
Question: Is it a correct statement that there has been no
successful takings legislation through MSHCP processes?
Mark: There has been no HCP that I'm aware of that
has been challenged on takings grounds. Certainly not,
I know for sure not in the regional context. Where there
have been, where the takings issues have arisen naturally is
where you have an inability for a landowner and the wildlife
agency to reach some kind of agreement or accommodation on the
activities proposed by the landowner and the landowner has concluded
that property has been taken as a result. That's where
the cases reside. And in most of those cases the courts
have ruled in favor of the Service, although there are, there
is at least one case I know in the context of water where the
courts have ruled against the Service on 5th Amendment grounds.
But at least in terms of the ?? cases in the last 5, 6 years,
the vast majority of them have ruled against the landowner claim.
And again, that's primarily because the Service almost never
ultimately refuses to permit an activity. That there may
be quite a bit of very tough negotiation and the outcome may
be not entirely applauded by the landowner, but ultimately there
is a resolution of the issue.
Steve: Marc? It goes back to your word "accommodation"
again. What I've seen, in the past, it goes to that alternative
dispute resolution provision. If you've got some good alternative
dispute resolutions and to the extent that you have an opportunity
to lay out the takings case then it typically doesn't create
a case because the local government or whatever body is helping
to administer the plan usually comes to some accommodation to
avoid the takings case.
Question: Assuming that the Steering Committee will
come to some consensus to the effect that landowners should be
compensated for something less than a constitutional taking.
What kind of provision, what kind of language, where should it
be inserted, do we want that will either effectively vest existing
zoning or assure reasonable compensation for diminution that
is short of a taking? Can it be done? If so, how?
If not, what are the alternatives?
Marc: One of the challenges of, well, the
challenge of putting together one of these plans is reaching
some kind of agreement with the Fish & Wildlife Service
that the plan is going to adequately address the needs of the
species that you want coverage for. When you're putting
together plans like this, you ultimately want to have some degree
of certainty that you're going to be able to implement the plan
as you have agreed with the Service to do, so that you can insure
that the permits that you've received are protected, they're
not vulnerable to suspension or revocation, that you are positioned
to carry out and implement the terms of the agreement, and that
the number of moving parts that you're responsible for are somewhat
minimized. And so my reaction to that question is that
if in fact you were to put such a provision or agreement into
the plan, what you've created is an uncertainty about whether
the plan could actually be implemented in a manner that your
permit requires. If you create new funding requirements
that you can't necessarily anticipate or calculate, you do run
the risk, unless you do have sort of unlimited resources, of
breaking the bank on the plan. And then of course putting
the permit into jeopardy. And I think that that is a direction
that most folks who go through a 4 or 5, 6, 7 year process, you
know, many, many meetings like the one you're having tonight,
and finally get to a point of resolution and acceptability from
the standpoint of all the stakeholders as well as the wildlife
agencies, then I think you want to again minimize any opportunities
to risk the validity of the permit and to maximize the opportunities
for people to feel like they've got certainty and assurance in
the piece of paper that they've gotten from the Fish & Wildlife
Service.
Question: Is your advice that if we do insert such a provision
that we be careful not to make it essentially an unfunded mandate,
that we show the Service that we can actually perform on it?
Marc: You will need to, as a condition of
being permitted, you will need to demonstrate that you have adequate
funding to do the things that you say you're going to do.
And whether those are, you know, management costs or monitoring
costs or land acquisition costs or public education costs, they
are going to amount to something and you will need to demonstrate
that those things, those implementation costs will be fundable.
If you add a wildcard into the implementation stage of the HCP,
then (1) it becomes more difficult to demonstrate that you have
the funding to implement the program, and (2) you may be putting
yourselves in a position where the costs start to mount to a
level where the program just simply can't be implemented just
because of the sheer costs of providing compensation to landowners
for something less than the taking. Again, one of the valuable
benefits I think of spelling out up front in the plan what your
sort of principles of equity and fairness are going to be is
to then think through what mechanisms, again, you could put in
place to avoid these discussions altogether, where you're in
a sense taking anticipatory steps against circumstances that
could otherwise arise that would trigger all this kind of stuff.
And if you put these kinds of mechanisms into a plan early on,
you ultimately really do avoid most circumstances that again
trigger these discussions.
Steve: Off the top of my head, dealing with Mark's issue
and I think he's absolutely right about that, that what you might
look at is elevating the standard, but where you've elevated
the standard above the constitutional protection, then you put
in place different remedies, non-monetary remedies.
Marc: Exactly, that's just what I was going
to say. Where, you know, some of the things that I had
just rattled off earlier about different mechanisms and approaches
that have been used in the past, none of them other then sort
of the acquisition fund involve monetary compensation.
And you know, I hesitate to say that an acquisition fund is really
designed to provide monetary compensation. It really is
designed to purchase properties that are valuable biologically
and add to the plan. And that's how I would characterize
them, where the priority for that for the funding of those acquisitions
might go to landowners who are burdened to a higher level than
would be appropriate. But again, if you have lands that
are not biologically important, there would be no reason to buy
then and there'd be no reason to worry about the other activities
that might occur on them. So I think again the justifications
for those kinds of acquisitions can be based on biology as opposed
to based on sort of the need to avoid a takings lawsuit.
And I think the same is true with all the other mechanisms that
I mentioned, which is to say, look, we're going to look across
a broad landscape to develop a plan that meets the needs of species.
And there's a lot of different ways we can do this. And
one of the ways we're going to do it is to provide for greater
flexibility for those folks who are likely to be unfairly burdened
by the process. Let's identify who they are, let's identify
how often these circumstances are likely to arise, and let's
identify some of the ways we might be able to again cut off at
the pass any particular approach that might put somebody in a
difficult position in the first place by providing them with
either greater opportunities to do the things that they want
to do on the land or to exempt them altogether from obligations
if they meet certain conditions and so on and so forth.
So I like the way whoever was just characterizing it. I
like the approach which is sort of to look at this not from the
standpoint of monetary compensation but from the standpoint of
greater flexibility to carry out certain activities in certain
cases.
Question: What about the possibility of inserting a provision
that would effectively vest existing zoning?
Steve: Again, legally the answer is yes and the Arizona
legislature did that with the protected development rights act
and you could do that in your plan. The county could
make that decision. And so you're right, I suppose theoretically
you could say as part of this plan, to avoid takings litigation,
to avoid vested rights claims, that as part of this plan we're
going to grandfather existing zoned property or existing platted
properties and provide some level of protection even if they
haven't under common law taken some action to vest that, that
would be a possibility.
Marc: I think that's right. I mean,
I think that that's a flexibility that you have to have in terms
of how you want to develop your plan so long as you analyze that
in the context of being able to meet ultimately your biological
goals and objectives for the program.
Question: What kinds of protections do I as a landowner
have against future zone changes or development?
Frank: To me this is in the realm of politics, not
law that we're talking about. I guess to turn your question
back around, for years and years, ever since, well, 1920,
I guess in the city of Tucson when they first had zoning, to
the present time, we have been saying that it's socially acceptable
for some owners to bear some incremental burden. That is,
we give some people the right to have a high rise building like
the one we're in and we limit some other people to one acre zoning
because we say, without compensation, because we say the total
benefit of society, we all share in that benefit. I guess
I'd have to then, with that preface, ask the question, if we've
been telling people in airport approach zones and floodplains
and historic district overlay zones and the whole host of other
situations in which we as a society have deemed there is some
reason for limiting development potential, why shouldn't they
be in the same position, that goes to what's now. You then
said, well, gee, I want to protect against changes in the future.
And then I guess I'd have to ask you back, you know, I'd love
to know that when I bought my home that there was never going
to be anything happen during the expected period of, you know,
my life residency there that would destroy my expectations about
it's future value. But we don't have that kind of guarantee.
Yeah, and that too. The comment was, "and the stock
market, too", amen. And so while it's very attractive,
particularly in a situation where the social values we're seeking
to prevent are ones that we've never identified previously as
having the same value as for example saving people from being
burned up in high rise buildings, where do we say we're going
to compensate people in those situations and not in all of the
others. So I guess I don't have an answer for you except
to turn it back and say what is the box we open if we do that?
Question: Does the balance clause about either the compensation
or the one acre hold up in light of the recent court decisions
on the down-zoning?
Steve: Well, let's go ahead and take that first.
And Frank was saying he's not sure he understood the question.
And I think I do and it's an interesting one I hadn't thought
of before. Remember that under the so-called Rusty Bowers
Clause, if you designate someone's private property as open space
on your comprehensive plan, what happens? And under that
clause you either get the permission of the property owner to
do that or you provide the one acre minimum zoning to that person
or the land use designation. And the question is, Frank,
does that violate the court's ruling in the county down-zoning
statute where the court said, just to give you that case real
quickly, the legislature several years ago, 3, 4, 5 years ago
said counties can't down-zone property on their own initiative
without getting the permission of the property owner. And
the Court of Appeals recently held, no, that would be an illegal
delegation. You're delegating the authority to the property
owner to say whether they can rezone the property or not.
I don't know whether that would, how the Rusty Bowers Clause
would be viewed under that because it wasn't just get the permission,
it's either get the permission or give this other category.
And I don't know whether because of that conjunctive, giving
the opportunity to do one or the other, whether that would save
it under that court case. What do you think?
Frank: Thank you, Steve. I didn't catch the
Rusty Bowers word in the question, so I didn't understand.
I'm not sure either. I mean, I think, off the top of my
head I think it probably would. I don't see the court extending
the principle in that case dramatically beyond that fact situation,
but who knows? It's an excellent question.
Question: Regarding TDR's as compensation;
wasn't there a court case where a landowner sued and it was determined
that the TDR was not compensation unless the cash had changed
hands?
Frank: The answer is yes and that's the Corrigan
case that I referred to. My response to that, and I mentioned
this earlier, is two-fold. First of all, subsequently we
had legislation in Arizona which in effect legitimizes TDR's
as a planning mechanism. As part of the Growing Smarter
Plus legislation. And that permits a local government to
use it as a means of just avoiding the question of it.
In other words, at the first level, is it a regulatory taking,
then you can use that as a way of avoiding a determination that
it is. And so then you wouldn't get into the second level
question about the compensation, the remedy for a regulatory
taking where the court said well it's got to be in cash money,
can't be in this script you called TDR's. You just don't
even reach that point. It's not a taking and so the question
of compensation doesn't arise.
Steve: And because of that, going back to an earlier
question, that's why I think that there can be non-monetary relief
given. It might be things like waivers, grandfathering,
things like that. But it might be things like TDR, like
transferable development rights might be part of what's given
to avoid it becoming a taking. And I think the state legislation
helps that. I'm hoping that it does. That's
why we put it in Growing Smarter Plus.
Question: Have conservation easements been used as a method
of compensation.
Steve: I've not seen it as a method of compensation, but
they use it as an inducement, as Frank says, and I think he's
right about that. And you can get a tax advantage from
that. And so oftentimes when several of my clients use
conservation easements, it's to get the tax advantage at the
same time giving the local government the open space lands.
Questions from the Public:
Gordon Harnack: My question involves rights. In Pima
County there are probably somewhere in the neighborhood of 2,500
mining claims. Many of them are small mining claims.
There are two types. One are patent mining claims which
are vested rights given by the federal government in which a
person owns the land and the minerals. The other is a vested
right issued by a government in which you don't own the land
but you own the right to obtain the minerals. And those
kind of claims, as patent mining claims, are property in that
they can be bought and sold, but you don't own the land.
My question is, does the Growing Smarter legislation apply and
does the vested rights apply? Your expectation being that,
mining claim owner is you're going to get the mineral value there,
you're going to put some dollars in it. So I'd like those
two issues discussed. Thank you.:
Frank: I guess your question is, Is this "property"
that's protected by the 5th Amendment of the Constitution and
the Arizona equivalent?
My guess is that it is. I mean I don't see any reason why
it isn't. We have recognized divisible interests in property
for purposes of compensation in eminent domain. Leasehold
interests, for example. I don't see why, if the mineral
estate has been severed from the fee, that that's any less compensable
or less protected under the 5th Amendment than the fee itself.
So that's my answer to the Property 101/Con Law 101 question.
Vested rights is two different animals and it's explained
on his little summary. One is the common law principles
of equitable estoppels. You've got to go to a judge to
get a determination that they exist in the first place and it's
based on a fact situation and rules which in Arizona require
a valid permit, some actions taken in reliance and good faith
on the part of the person seeking that relief. The other
animal, the other pigeonhole, is the statutory vesting provision
which in effect creates a lower threshold for obtaining gr
But we're just talking about then protecting people against a
change in the rules. And the point to be made here is simply
that the legislature, whether it's the state or Pima County,
for that example, for that matter, is in a position to create
vesting rules to promote, presumably, fairness in the application
of new regulations.
Steve is pointing out, what about the county restrictions on
regulating mining and agriculture? And I guess that's really,
I mean, we don't get to whether there's a constitutional protection
or an issue of vested rights unless we have a regulation in the
first place that these remedies would be sought for and if we
can't regulate mining, we can't regulate mining.
Mark: I just want to echo what I said before which
is that the relationship between the federal regulation and a
vested right really depends upon whether it's a vested right
that is granted under state law or whether it's a vested right
as recognized, you know, under federal law. From the standpoint
of a state vested right, the federal regulation would not necessarily
recognize the vested right as it would be recognized at the state
level. If it's a federal vested right, then it's a different
outcome where the right is recognized as a full property right
as it relates to the application of another federal regulation.
Dennis Melin: My question basically goes to private
property. We talk only about real property and only specifically
about undeveloped vacant land. I have a cat, that's private
property, I have a dog, I have a house, I have a car, I have
all kinds of things that are private property, and they are not
subject to government taking or partial taking without compensation.
Can you please discuss the difference between private property
and undeveloped vacant land, real property? Thank you.
Frank: Again, Con Law 101. Steve and Mark,
please jump in if you think I'm going too far astray here.
The 5th Amendment that Steve quoted says, "not shall property"
be taken by I don't think there's any distinction there
between real and other forms of property recognized at law.
So if government seized your cat for some public purpose and
you can establish that it had some kind of value, I think you
could, you know, you could at least make a claim. I don't
know if it'd be recognized or not, but you could make a claim.
So no, I don't think, just as to the answer to the question about
mineral rights in land, in other words, sub-estates in land,
I don't think there's any distinction at least fundamentally
in federal or state law as to other forms of property like personal.
Pete Tescione: Yeah, maybe I can close this on a
real off the wall note. There's one thing I don't understand.
Arguably the largest property owner in Pima County is the State
of Arizona who have been singularly uncooperative about the SDCP.
I'm wondering, because property taxes are the county's primary
source of revenue, why doesn't the state pay at least minimum
property tax on all that state land?
Steve: Wow, you're right, nice off the wall question
to finish. You know, keep in mind that state trust lands
aren't actually owned by the state. And I think all of
you know this, that they are actually held in trust by the state
for certain beneficiaries of those trusts. They were given
by the federal government for certain beneficiaries. Most
of them, 87% of the beneficiaries are the K through 12 schools.
So the school system technically owns, the trust owns it but
they're the beneficiaries of that land. So to the extent
that you made those lands subject to taxation, essentially it
would come out of the beneficiaries, it'd come out of the K through
12 schools and the mental hospital and the others. Because
I know the legislature wouldn't pay the Pima County tax.
What they do is they just say, okay, beneficiary. So the
trust fund that's been set up would end up paying the taxes,
which means basically it ends up coming out of education in the
end.
Pete Tescione: Is there any legislation or anything
in the Constitution that exempts those state trust lands from
taxations?
Steve: Oh, yeah, they are exempt right now from
taxation, yes. So if you were to, and yeah I guess, I suppose
theoretically, thinking outside the box as Larry puts it, you
know, if we passed, if we put on the ballot a constitutional
amendment saying state trust lands should be subject to taxation,
what would happen is that the legislature would say we'd take
those funds out of the trust for education.
Frank: For everybody's benefit, the concept of the
question is not so far fetched. I mean, we have many examples
of one government, let's say the federal or state, paying another
level of government, usually local government, some amounts in
lieu of taxes that would otherwise have been paid. You
know, the typical example is where lands are taken over for like
a military base or something--CAP, other examples like that where
it can have a dramatic impact, usually on the public school tax
base. And so recognizing the inequity of that, all of us
taxpayers in the state imposing an inordinate burden on those
of a small school district, for example, they have legislated
some mechanism to achieve a compensation.
Review of New Stakeholder Agreements/Resolutions
This issue was deferred.
Discussion of Key Decisions and Schedule for their consideration
This issue was deferred.
Sherry Barrett announced that there would be hearings on the
pygmy owl critical habitat. Thursday, January 23rd at the Leo
Rich Theater. Question and Answers from 4:30 to 5:30
followed by a brief presentation by Scott Richardson on the owl
and the critical habitat and by the economists. 6:30 to
9 is the hearing where no questions, only testimony.
Adjourn: 7:30pm