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Street and Road Exactions After Dolan:
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| Stephen R. Giles | |||
| Session: Monday, April 17, 2000 1:00--2:15 p.m. | Author Info | ||
Perhaps one percent of all rezoning petitions considered by the Little Rock Planning Commission and the Board of Directors is appealed to court and I would venture to say that the City wins ninety-something percent of those cases. This is probably due to the heavy burden of proof necessary to overcome the presumption of validity the law attaches to legislative zoning decisions of municipalities. But occasionally a case comes along that thoroughly confuses the city planners and attorneys and leaves them scratching their collective heads about what to do next. The City of Little Rock had such an experience with a case that began as a "garden variety" zoning matter and ended up a federal case nobody really won. This discussion is intended to share Little Rock's boardroom and courtroom experience in the hope that other city planners and attorneys may chart a safer path through the legal minefield of dedication requirements with the rezoning of land.
I. Introduction and Background
The City of Little Rock (the "City") is the largest City and the capitol of the state of Arkansas. Arkansas is not a constitutional home rule state. Municipal corporations enjoy only that power and authority specifically delegated by the state legislature and those powers necessary and incidental to implement the express authority. Pursuant to its authority under state law (1) Little Rock created a planning commission, enacted a zoning ordinance and adopted a master street plan. The law permits municipalities to adopt, among other things, regulations to require the reasonable dedication of land to further the master plans of the city. Currently there is no statutory authority under Arkansas law for cities to enact impact fee regulations as a means of acquiring land and building roads so cities are left to enforce traditional methods of exactions and dedication requirements. (2)
The master street plan establishes, among other things, minimum right-of-way requirements for the various classifications of the City street system. The dedication of right-of-way consistent with the current master street plan standard has always been required upon the platting and subdivision of land. However, since the mid-1980s Little Rock has required that every applicant for rezoning of property shall dedicate right-of-way for street purposes according to the latest standards set forth in the master street plan. The decision to "back up" the dedication process to the zoning stage was made for a couple of reasons. First, land required for street right-of-way should be devoted to such purpose before the City enhances the value of the tract by the act of rezoning. Second, it seemed fairer to require the current landowner to dedicate rather than to foist the requirement on a subsequent owner upon application for a building permit after she paid the enhanced price for the rezoned parcel.
Most landowners do not object to the dedication requirement because (1) they understand that a reasonable dedication for streets is a small price to pay for the benefit of enhanced land value created by the rezoning, or (2) it is not worth the time and expense to fight city hall. Nevertheless, with the recent emergence of activism in the property rights movement there is always someone who is willing to take on the fight against dedication requirements based upon principle, not necessarily economics.
It is against this background that Little Rock was presented with its first challenge to a denial of rezoning based upon the United States Supreme Court ruling in Dolan v. City of Tigard. (3) Prior to this challenge the City believed it could legitimately deny rezoning to landowners who refused to dedicate street right-of-way without having to demonstrate the impact of the development on the existing street system. This belief was based upon the opinion that the "rough proportionality" requirement of Dolan does not apply to zoning decisions which are discretionary acts of the City's legislative body. The Eighth Circuit Court of Appeals found otherwise in the case of Charles Goss v. City of Little Rock, Arkansas. (4)
After more than five years of hearings, appeals and litigation in federal court, it was finally determined under the facts of the Goss case that:
1) the dedication for street right-of-way imposed as a condition on the rezoning of property from residential to commercial was an unconstitutional taking of property without payment of just compensation;
2) landowner was not entitled to have his property rezoned;
3) the city could have avoided a taking by just declining to rezone the property instead of declining because landowner refused to dedicate land;
4) landowner could not prove he was entitled to compensatory damages;
5) landowner was entitled to recover attorneys fees but not nearly what he claimed.
II. History of the Litigation
Charles Goss owns real property located on Stagecoach Road, a/k/a Arkansas State Highway No. 5, in the southwest section of the City within a predominately rural but growing area. The property was platted into two large lots years ago when the property was within the unincorporated area of Pulaski County, Arkansas. The entire tract which was the subject of this lawsuit contains approximately 4 acres. Goss operates a small business on one of the lots consisting of a convenience store, gas station, laundromat, and car wash which the Goss family has operated over twenty years. Goss has a residence on the other lot with a barn and storage buildings. In 1985, the City annexed this area including the Goss property and zoned the area R-2 single family residential, which was the default zone placed on newly annexed land coming into Little Rock city limits. Under the City's zoning ordinance, Goss was permitted to continue his commercial operation in the residential zone as a nonconforming use as long as he did not expand, change, enlarge or discontinue the operation for more than one consecutive year.
In April 1993 Goss filed a petition to rezone the entire 4 acre tract to C-4 open storage commercial, stating in his application that he "just wanted to continue to use his property in the same manner as it had been used for many years." Goss downgraded his request to C-3 enclosed commercial when City staff told him they could not support a C-4 request.
The staff report to the Planning Commission stated that staff would support a C-3 rezoning, although the City's adopted Land Use Plan showed the area as C-1 Neighborhood Commercial, a less intensive use classification. Staff noted that the surrounding residential owners have repeatedly made it clear that this area is a stable and viable single-family neighborhood. Therefore, no zoning should be allowed which would encourage strip commercial uses designed to meet more that the immediate neighborhood needs. There was some neighborhood opposition to Goss' request in the form of two letters and two phone calls.
In May 1993 the City Planning Commission reviewed the application and agreed to recommend to the Board of Directors that the property be rezoned to C-3 general commercial district. It was not clear in Goss' presentation why he wanted to rezone the entire 4 acres to commercial while his application stated that he just wanted to continue the uses as existing -- given that at least half of the property's existing use was residential. (5) Nevertheless, the Planning Commission recommended to the Board of Directors that the rezoning petition be approved, subject to a further recommendation that Goss be required to dedicate a strip of land across the frontage of the tract as additional right-of-way for Highway 5 for future expansion pursuant the adopted master street plan of the City. The dedication would have run the entire length of Goss' property (about 633 feet) and 55 feet from the centerline of the existing highway. Although Goss' property line extended to the centerline of the highway, 30 of the 55 feet had been used by the public for highway purposes for many years and could not be used by Goss for any purpose. Therefore, the requested dedication actually consisted, for all practical purposes, of 25 feet of Goss' property and that amount was later reduced by staff to 20 feet.
Goss objected to the dedication requirement and the item was forwarded to the Board of Directors to consider the rezoning petition with Goss' request for a waiver from the dedication requirement. In February, 1995 the Board of Directors heard the matter and refused to rezone the property without the dedication of the frontage for right-of-way purposes. Most of the discussion at the Board level consisted of a debate on whether it was appropriate to rezone this property if the City could not get the dedication because, as one Board member stated in the record, the City treasury would later have to pay condemnation damages to appropriate the right-of-way after the City enhanced the value of the property by rezoning it from residential to commercial. In addition, as staff noted, the dedication should be required because the requested rezoning would allow a different, heavy traffic-producing business on the property.
Goss chose not to pursue an appeal in state court (6) but instead filed suit directly in U.S. District Court on March 20, 1995, asserting that the City 's requirement of dedication of his property as a condition of rezoning for continued use identical to the nonconforming use violates the Fifth and Fourteenth Amendments to the U.S. Constitution and provisions of the Arkansas Constitution. Goss cited Dolan v. Tigard as the precedent for finding that the city violated his constitutional rights by requiring him to give up his property. Goss sought an injunction to rezone the property to C-3 without the dedication requirement as well as punitive damages and attorneys' fees. Goss claimed in the complaint that the Board refused to rezone without the dedication even though his application and all the proof indicated there was to be no contemplated change in the use of this property and thus there would be no increase in traffic to justify the dedication requirement.
The City filed a motion to dismiss the suit in federal court because Goss bypassed the available remedy in state court which was required by the U.S. Supreme Court in previous decisions. (7) U.S. District Court Judge Susan Webber Wright agreed with the City that Goss should have initially taken his appeal to state court, and she dismissed the complaint basing her decision on Goss' representation to the Court that he had no intention of changing the manner in which he was using his property and he made no claim that he was attempting to sell the property. Because Goss could continue to use the property as it had always been used, the Court reasoned that Goss had not been harmed by the failure of the City to rezone. Goss then filed a Motion to Alter Judgment with the District Court attaching an affidavit stating for the first time that he had a contract to sell his property and was therefore harmed by the failure to rezone. The motion was denied.
Goss appealed to the Eighth Circuit Court of Appeals. Goss claimed that he was attempting to sell his property contingent on rezoning. (8) The Eighth Circuit reversed Judge Wright's dismissal of the case and remanded to her for a trial to determine whether there was a nexus between the dedication requirement and Goss' proposed use, and, if so, whether the demanded dedication of land bears some "rough proportionality" to the impact of the proposed rezoning. (9)
In its trial brief, the city argued that there were significant differences between Dolan and this case because Dolan concerned an adjudicative decision about a dedication imposed as a condition of an approved building permit, while the Goss involved a legislative decision resulting in a denial of rezoning in which dedication was discussed but no dedication was imposed. Therefore, because Goss never gave a deed of the right-of-way to the City, Dolan was inapplicable to this case and the city should not be required to prove that the condition bears "rough proportionality" to the proposed rezoning.
III. The Evidence at Trial on "Rough Proportionality"
At trial the City called its Director of Planning who testified that the C-3 commercial classification allowed 81 uses by right and 24 other uses by conditional use permit, noting that the 4 acre tract is large enough to develop a shopping center, a hospital and any number of other high traffic producing uses. The Court concluded that there was, indeed, a nexus between the dedication of right-of-way and the City's concern that a more intense use of the Goss property permitted by the rezoning may result in the City having to pay a higher condemnation award. Thus the "essential nexus" requirement had been met.
The Court also allowed the City to introduce testimony to establish for the record that its action in refusing to grant the rezoning was legislative decision entitled to the less demanding rational basis test. Judge Wright agreed with the city's contention, but she stated that she was bound by the Eighth Circuit's decision that the City's action was in fact adjudicative in nature and, therefore, the "rough proportionality" test of Dolan must be applied.
The City presented the testimony of the City Traffic Engineer. His traffic count was based upon the trips in a 24 hour period which would "conceivably" be generated by a future strip commercial development at this location which would cause a need for the additional right-of-way. However, the evidence indicated there were no current City plans to widen Highway 5 and the witnesses could not say with any certainty when or if the right-of-way would be needed for future expansion of the roadway. (10)
The City also provided the testimony of an expert appraiser who testified that the rezoning of the Goss property by the City would enhance the value of the parcel from $1.50 per square foot to about $3.50 per square foot, and that the enhancement in value would more than offset any diminution in value caused by the dedication of the right-of-way.
At the conclusion of the evidence in the case Judge Wright found that the City had failed to meet its burden under Dolan. She said that although Dolan does not require any precise mathematical calculation, the City must make an effort to quantify its findings in support of the dedication beyond what a proposed development could "conceivably" generate. Citing a phrase from Dolan, the Court said that the City has to make "an individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development." This is, the Court said, the so-called "rough proportionality" analysis. The Court found that Little Rock's attempt at the assessment was too speculative and amorphous because the City could not establish that the rezoning of Goss' property to C-3 commercial would have an adverse impact on the City's legitimate interest in controlling traffic in commercial areas.
Goss disclosed for the first time during trial that the contract to buy his land consisted of a verbal agreement with his son and a friend to sell the property contingent on rezoning and that the City's denial caused him to lose $515,000. The Court did not buy that argument. Goss did not claim nor was there any evidence of a diminution of the economically viable use of his property as a result of the denial of rezoning. In fact, the City introduced the testimony of an expert appraisal witness who testified that not only was there no decline in the value of the landowner's property as a result of the denial of the rezoning request, but that rezoning Goss' property to C-3 would enhance the market value of the property by an amount roughly equal to the value of the strip frontage the City sought to exact with the rezoning. The Court found that in downgrading his original request from "C-4" classification, Goss could have applied for a Planned Commercial Development (PCD) instead of insisting on C-3 and that would have removed the nonconforming designation from his property and allowed him to sell it as is and to rebuild the property if it were somehow damaged or destroyed. Thus, even without C-3 zoning, Goss would have received all of the relief he sought with a PCD classification and therefore he had not demonstrated any harm from the denial of his application.
The Court concluded that the City was obligated to rezone Goss' property to C-3 commercial without the dedication of any of his property rights, noting that the City may condition a future building permit on dedication of right-of-way if the City can establish the required "rough proportionality" at that time. The Court also found that Goss failed to prove he was entitled to compensatory and punitive damages and denied attorney's fees.
IV. The Second Court of Appeals Decision
The case went back to the Eighth Circuit Court of Appeals, this time on the City's appeal of Judge Wright's ruling that the dedication requirement was a taking and Goss appealed the denials of compensatory damages and attorneys fees. The Court of Appeals held there was a nexus between the dedication and the City's interest in declining to rezone Goss' property, but the City had not met its burden of proving rough proportionality, thus the dedication requirement was a taking. The Court reversed Judge Wright's ruling that the City must rezone Goss' property without the dedication requirement, finding that the City had a legitimate interest to deny the rezoning outright but not to base it on an unconstitutional dedication requirement. The Court affirmed Judge Wright's denial of compensatory and punitive damages, but remanded the case for a determination of attorney's fees "taking into account the limited success Goss has achieved in the litigation." (11)
On remand to federal district court, Judge Wright granted attorneys fees and costs to Goss in the amount of approximately $33,000 out of almost $150,000 claimed by Goss' attorneys.
Little Rock filed a petition for writ of certiorari asking the United States Supreme Court to overrule the Eighth Circuit Court of Appeals but the petition was denied. Indeed, the City believed that it should have prevailed because the U.S. Supreme had recognized in Dolan that "in evaluating must generally applicable zoning regulations, the burden popularly rest on the party challenging the regulation to prove that it constitutes an arbitrary regulation of property rights." (12)
V. Handling Rezoning Petitions in the Wake of Goss.
So what has Little Rock learned about the Goss experience? The Court said in no uncertain terms that the City could have avoided years of litigation by just denying Mr.Goss' request to rezone, basing its decision on reasons other than his refusal to dedicate land. That way the case would have been heard in state court for a determination on whether the denial was arbitrary without the claim of unconstitutional taking of property.
The City's planning department attaches a form to every application to rezone land to determine whether the applicant agrees or refuses to dedicate right-of-way. If the applicant refuses, the planning department informs the public works department and the city attorney so that the application can be reviewed in advance of the public meetings to ascertain all of the rational reasons for denial of the application in the event of appeal.
A recent approach to the problem has been to discourage and even prohibit speculative zoning. It is now difficult to get a recommendation of approval from the Planning Commission unless the rezoning applicant has committed to a specific use or a mixture of uses. Many applications that begin with general reclassification of property are converted during the review process to a planned zoning development or to a rezoning with conditions. This option is available to the applicant to address the concerns of the Planning Commission about specific aspects of the development.
Another feature that has become more prevalent in public hearings is the request for traffic "numbers" from the applicant and, in some cases, actual traffic studies of the expected impact on the existing street system. This information enables the City to make a record to guide its decision and to justify the dedication requirement on a development in case the matter is appealed to court.
VI. Conclusion
It is still not clear from either the Dolan or Goss cases how the "rough proportionality" finding will apply, if at all, to exactions or dedications of land which are intended to apply generally such as Little Rock's master street plan. Footnote 8 in Dolan appears to indicate that the burden to make such findings has not been shifted to the City when generally applicable, legislatively-adopted dedication requirements are involved. However, the dedication requirement in Goss was imposed, as it is in all developments, pursuant to the master street plan. Little Rock may have fared better in the Goss case had it made a record of how the proposed rezoning fits into the profile of the development impacts which resulted in the need for a master street plan in the first place.
Perhaps the message of Dolan and Goss is clearer than
we think -- local governments have broad discretion to enact zoning regulations
which provide for the health, safety and general welfare of the community.
It is not this power or the purposes of local zoning regulations that are
in question. Rather it is the means which municipalities employ to achieve
those purposes which are at issue. The burden of proof to show compliance
with rough proportionality should not be difficult for local governments
because findings of some kind must be made by the municipality if the imposition
of the exaction is to be warranted at all. In the final analysis, at least
at the zoning stage, if a city does not have sufficient information to
make the required findings it can "just say no" to property development
which is unaccompanied by a reasonable dedication of land for street right-of-way.
1. Ark. Code Ann. § 14-56-401--425 (Michie Repl. 1998).
2. For an example of impact fee enabling legislation, see Ga. Code Ann. § 36-71 (1993).
4. 151 F.3d 861(8th Cir.1998); Rehearing En Banc denied Oct. 1, 1998.
5. This fact figured prominently in the City's argument at trial that the City was justified in turning down the application because it was not necessary to rezone 4 acres to continue the existing commercial uses. In retrospect, the City Board should have placed more emphasis in the public hearings on this fact as well as the neighborhood opposition (and less emphasis on the refusal to dedicate) to justify its denial of rezoning.
6. Under Arkansas law appeals from zoning decisions of the city are to be filed in state Chancery Court for a determination of whether the decision was arbitrary, capricious or unreasonable; or, stated another way, whether there was a rational basis for the city's decision..
7. Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985).
8. Another surprise to the City was the Eighth Circuit citing in its opinion a contention in Goss' appellate brief that the dedication would take 22% of Goss' entire property. The actual extent of the dedication was 7.7% of his property, taking into account the prescriptive easement of the public in the existing highway. Even without the easement the dedication did not amount to 22%. The 7.7%was the only figure later admitted into evidence at trial. Nevertheless, the Eighth Circuit inexplicably continued to rely on the 22% figure and cited it in its opinions.
9. Goss v. City of Little Rock, 90 F.3rd 310 (8th Cir. 1996).
10. A fact that was disclosed at trial but not reported in the opinion was that the Arkansas State Highway Commission was preparing plans to widen Highway 5, but it was not clear at the time whether Goss' property would be included in the widening project or whether the state would need the entire 55 feet from centerline to construct its improvements.
11. Goss v. City of Little Rock, 151 F.3d 861 (8th Cir. 1998).
Copyright 2000 By Author
Stephen R. Giles
Deputy City Attorney
City of Little Rock, Arkansas
Since the mid-1980s Mr. Giles' law practice has emphasized land use, real
estate and eminent domain. He represents the Little Rock Planning Commission,
the Board of Zoning Adjustment and the Historic District Commission, and
he is active in housing, zoning and subdivision code enforcement. Mr. Giles
has testified in court as an expert witness on zoning law. Mr. Giles is
a frequent speaker on land-use issues and current trends in planning law
in Arkansas and he has recently addressed the International Municipal Lawyers
Association concerning billboard regulations. Having achieved his B.A.
and J.D. degrees from the University of Arkansas in Fayetteville, he is
an active member of the Arkansas and Pulaski County Bar Associations.
He can be reached at the following E-mail address:
sgiles@littlerock.state.ar.us