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Development Agreements and Annexation Agreements* |
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David L. Callies, AICP
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Author Info |
[D]evelopment agreements (§§ 65864-65869.5) between a developer and a local government limit the power of that government to apply newly enacted ordinances to ongoing developments. Unless otherwise provided in the agreement, the rules, regulations, and official policies governing permitted uses, density, design, improvements, and construction are those in effect when the agreement is executed . . . The purpose of . . . development agreements is to allow a developer who needs additional discretionary approvals to complete a long term project approval, regardless of any intervening changes in local regulations.
Private sector need for a mechanism to guarantee the continued applicability of existing (or new) development regulations with respect to a particular project grew from dissatisfaction with cases deciding the point at which a landowner's right to proceed with a project, legal when conceptualized or commenced, in the face of changed regulations prohibiting such development, vests. Rooted in the concept of nonconformities, the concept of "vested rights" is variously interpreted throughout the United States to provide that developers are guaranteed to proceed with such developments from after a simple rezoning to only after the issuance of a building permit.3 It is holdings in the latter category that prompted vested rights bills to be drafted in two of the ten states with full-blown vested rights/development agreements bills: California and Hawaii.
In California, the first state to pass such a bill, it was Avco Community Developers Inc. v. South Coast Regional Comm'n.,4 which galvanized the development community into seeking legislative relief. Despite the expenditure of nearly $3 million and the rough grading of 74 acres, the California Supreme Court ruled that after-passed state legislation enacted for the protection of the coastal zone, together with a permit from the agency upon which the coastal protection responsibility was conferred, was necessary before Avco's rights to continue developing vested. This was because such rights did not vest in California until the issuance of a building permit, even though developers incurred substantial costs prior to the issuing of such a permit.
Since the passage of the California statute, implementation has been rapid. According to one commentator, over half the local governments in California have negotiated nearly 700 agreements since 1980. The development agreement appears to be used by cities of all sizes, and for single-stage and multistage projects alike, though predictably the number of such agreements is largest in the larger California cities.5
In Hawaii, the second state to enact a development agreements statute, (modelled extensively after the California statute) the bill was spawned by County of Kauai v. Pacific Standard Life Ins. Co.,6 colloquially known as the "Nukolii" case after the beach upon which a proposed hotel and condominium project was to be constructed. There, the Hawaii Supreme Court held that rights to develop did not vest until the last discretionary permit was issued. As it happened, the court held the last discretionary permit was the holding of a referendum on the applicable beach zoning, since the appropriate county official certified the petition for the placing of rezoning on the ballot before the county issued coastal zone special area management permits - normally the last discretionary permits in the land development process in the County of Kauai at that time.
The exceptional difference between the two types of agreement is the benefit/burden of annexing the subject property to the local government's territory under an annexation agreement. The landowner generally obtains a variety of services and protection as a part of such a general purpose local government's territorial jurisdiction, but must subject itself to that local government's property and other taxes. The local government obtains additional tax revenues together with a corresponding increase in valuation for general borrowing by means of general obligation bonds, but must provide police, fire and often utility services to its newly-annexed territory. Which side is the most advantaged or disadvantaged depends, of course, on the circumstances of the annexation. A new shopping center, for example, may be more attractive to a local government than a sprawling single-family residential project. Both will require a level of municipal services, but the former will in all likelihood generate more revenue, (particularly if the local government collects a sales or business tax), and require fewer services like parks and schools.
This difference - annexation - between the two also raises a few additional legal problems, some of which are treated in more detail below. As with any other annexation, the land subject to an annexation agreement must be contiguous to the annexing municipality. The process must generally comply with the applicable annexation procedural requirements, such as notice to residents and landowners of the parcel to be annexed, and hearings. Most of these legal problems are outside the subject matter of the issues raised by the agreements themselves, however, and so this paper does not deal with them.
As it is legally difficult, if not impossible, for the landowner-developer to obtain enforceable assurances that land use regulations may not change during the life of major land development projects - particularly multi-phase development projects extending over many years - and as there are still limits to what local government can extract as a price for permitting land development,7 both parties in theory have adequate reason to negotiate such an agreement. From a contractual perspective, there is adequate consideration flowing to support such a bilateral agreement. This may be particularly important given the frequent use of conditional zoning, which often borders on contract zoning, whereby local government units reclassify property to permit more intense development upon the promise of the developer to do certain things which are memorialized in one or more unilateral covenants deposited with the local government and recorded. However, as the covenants are generally on their face devoid of any mutuality, and as local government actions to enforce them have often been unsuccessful,8 a bilateral contract, particularly one which is sanctioned by the state through enabling legislation reciting the public purpose behind such agreement, is by far a more sound way to proceed. Moreover, the unilateral deposit of covenants by the developer noted above provides little assurance that the local government will maintain the zoning for which the promises set out in the covenants were made.
Here, we are principally concerned with the problems - common to both - of authority (generally statutory) to enter into such agreements, bargaining away the police power, and the permissible subject matter of such agreements. Following a discussion of these fundamental legal issues, this paper continues with a discussion of more particular problems, such as accordance with comprehensive plans, character of the agreement (administrative or legislative) and binding of other governmental agencies. The chapter ends with a checklist for drafting annexation and development agreements.
The prohibition against bargaining away the police power finds its source in the so-called "reserved power doctrine."14 Under this doctrine, bargaining away the police power is the equivalent of a current legislature attempting to exercise legislative power reserved to later legislatures.15 However, an analysis of the cases indicates that what the courts generally inveigh against is such bargaining away forever, or at least for a very long time. The source of the doctrine, the Brick Presbyterian case, cited above, involved a municipal abrogation of a lease executed over fifty years before. While some later cases do involve invalidation of municipal action just a few years old,16 the majority deal with behavior further back in time. The responsive and dominant view is that development agreements, drafted to reserve some governmental control over the agreement, do not contract away the police power, but rather constitute a valid present exercise of that power. Thus, in one of the few cases dealing with the validity of development agreements, the Nebraska Supreme Court held:17
"In sum, we find that there is not clear and satisfactory evidence to support the appellants' contention that the city has bargained away its police power. The evidence clearly shows that the city's police powers are not abridged in any manner and that the agreement is expressly subject to the remedies available to the city under the Omaha Municipal Code. Further, we find that the agreement actually enhances the city's regulatory control over the development agreement rather than limiting it."
Also, where a foreign corporation attempted to disconnect its territory from the Colorado City of Greenwood in part on the ground that the annexation agreement under which the property was first annexed inhibited the city's future zoning power, a federal district court18 held that preannexation agreements which impose certain zoning classifications as conditions of annexation "have been upheld as valid and enforceable"19 in Colorado. The court went on to find that the particular zoning in the instant case fell into this category. To the same effect are several state court decisions upholding annexation agreements which restrict a local government's power to later change zoning granted and guaranteed during the life of the agreement.20
Moreover, two California Superior Court cases in which development agreements figure prominently basically support the technique, although the validity of the agreements were not ultimately at issue in either.21 Indeed, in dicta in the Torrance case, the Court said: "[I]f the city sought to impose requirements inconsistent or in conflict with the Development Agreement, it would violate rights, possessed by Lincoln which are both vested and fundamental [but]. . .the rejection of underground parking, the requirement of 'for sale' condominiums and concern about aesthetics and landscaping are not inconsistent or in conflict with the Development Agreement vested rights are not at issue."22
Two California cases dealing with other than development or annexation agreements also support the proposition that agreeing to "freeze" certain land use regulations or agree to approve certain land development projects does not constitute bargaining away the police power. In one, the City of Vista reneged on a settlement agreement providing for a specific plan and zoning for the subject property permitting construction at an agreed maximum density.23 Although the City did rezone pursuant to the agreement, it failed to approve a site development plan, in part to force a reduction in development density. The City argued it had unlawfully contracted away its police power in the agreement. Citing the Morrison Homes24 annexation agreement case, the court held that while a city cannot generally contract away its legislative and governmental functions, the rule applies only in instances where a city surrenders control of its functions.25 Here, it could still exercise discretion over the site development process even though it had guaranteed density and zoning. The court awarded damages based on the difference between the value of the property with 140 units and with only 55 (zoning contrary to the settlement agreement) or $727,500. 26
For a contrary, if somewhat dated, position, see the long dissent by Justice Moore from Colorado in City of Colorado Springs v. Kitty Hawk Dev't Co.,27 where a corporate subdivision developer sued to recover payment to Colorado Springs for the acquisition of public parks, made under an annexation agreement. A divided court held that since the developer had obtained water and sewer services for its development under the agreement and annexation to the city, it could not now seek to set aside the agreement. Opining that "the majority opinion amounts to the longest and most dangerous step yet taken by this court in the general direction of emasculation and destruction of property rights,"28 the dissent suggests that annexation agreements cannot require of a landowner that which the city could not constitutionally exact under the police power if the subject territory were already within the city's jurisdiction, even if that exaction is a tradeoff for that which the developer seeks, such as the discretionary annexation of its land. Presumably the dissent would take the same view concerning such a tradeoff for local government freezing of land development regulations under a development agreement. This is decidedly a minority view today. What informed commentary there has been on the various statutes appears to agree that, especially if there is supporting state legislation, courts should have little difficulty in supporting development agreements and annexation agreements against a reserved powers/bargaining away the police power argument.29
"[n]o State shall . . . pass any . . . law impairing the obligation of contracts."30 Although statutorily defined as either a legislative or administrative act, a development agreement will be treated as a contract "when the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State."31
The limitation of the contracts clause is, however, neither literal nor absolute.32 The courts acknowledge that if the contracts clause is to have any meaning it must constitute some limitation on the exercise of the police power, but have determined that not all impairments rise to the level of unconstitutional impairments.33 The U.S. Supreme Court has held that the contracts clause limitation cannot operate to eclipse or eliminate "'essential attributes of sovereign power' . . . necessarily reserved by the States to safeguard the welfare of their citizens."34 The test in U.S. Trust Co., as refined in Allied Structural Steel Co. v. Spannus,35 ultimately requires a balancing of the exercise of the police power against the impairment. The decisions suggest that any exercise of the police power which impairs its obligations under a development agreement would be subject to strict scrutiny, and must be justifiable as an act "reasonable and necessary to serve an important public purpose."36 Just what constitutes an "important public purpose" sufficient to justify the impairment of contract obligations is a de facto determination. In U.S. Trust Co., bondholders' security interest outweighed the state's interest in pollution control, rapid transit, and resource conservation. In Allied Structural Steel, the state's interest in protecting its citizens' pensions failed to prevail over a private company's rights in its own pension plan.37
The California Supreme Court set the standard, with respect to land development agreements, in Denio v. City of Huntington Beach,38 followed in Carruth v. City of Madera.39 In Carruth, the City contended that obligations under an annexation agreement entered into by a predecessor council were unenforceable, since the agreement was invalid because it deprived the successor city council of the power to determine city policy and act in the public interest. The court held that the City was bound, and that a contract made by the council or other governing body of a municipality, which contract appeared to have been fair, just, and reasonable at the time of its execution, is neither void nor voidable merely because some of its executory features may operate to bind a successor council.40
In sum, as recent commentators have noted, the current application of the reserved powers clause, when used to abrogate government-private contracts, has been rare, and courts have attempted to find other grounds to uphold those contracts which are fair, just, reasonable and advantageous to the local government.41 It is unlikely that courts will fall back upon the reserved powers clause to invalidate development agreements, particularly if passed pursuant to state statute.
The authorization of preannexation agreements by statute, such as section 11-15.1-1, serves to further important governmental purposes, such as the encouragement of expanding urban areas and to do so uniformly, economically, efficiently and fairly, with optimum provisions made for the establishment of land use controls and necessary municipal improvements including streets, water, sewer systems, schools, parks, and similar installations. This approach also discourages fragmentation and proliferation of special districts. Additional positive effects of such agreements include controls over health, sanitation, fire prevention and police protection, which are vital to governing communities.
Therefore, most statutes set out the public purposes and goals of a development agreement in strong public purpose-serving language:46
As to the bartering away of unrelated (to land use) emoluments, a well-drafted statute generally limits such agreements to specific land use matters, with a catch-all for related matters.
Obviously, what is contemplated is the tradeoff of zoning for development-generated public infrastructure needs (whether or not, it should be added, generated by the instant development). This is confirmed by cases which uphold cooperative and annexation agreements;47 low-rent housing for zoning;48 annexation and zoning and sewer connections for annexation and annexation fees;49 interpreting limitations on a pre-statute annexation agreement, thereby upholding the process by implication; and redevelopment agreements.50
The importance of a well-drafted statute in order to help guarantee the legality of the annexation or development agreement in the face of a reserved powers/bargaining away of the police power challenge is thus clearly demonstrated. Indeed, there is only one significant case upholding a development agreement against this and other challenges without the benefit of such a statute.51 It is therefore worth noting what other basic provisions are contained in a typical development agreement statute.
The importance of the plan is further demonstrated by the Idaho supreme court in Sprenger, Grubb & Associates, Inc. v. City of Hailey.52 There, the court upheld a rezoning over the objections of the developers of property subject to what the court called a development agreement (arguably an annexation agreement) on the ground that the applicable plan was sufficiently broad that it supported the contested downzoning.
As with zoning, what follows from the statutory declarations - legislative in California, administrative (quasi-judicial?) in Hawaii - is more than a matter of form. Legislative decisions are referendable. Quasi-judicial ones are not.54 Given the common use of the referendum in both California and Hawaii to address land use issues, development agreements in Hawaii at least are likely to be "referendum-proof" as well as proof against government change, during the life of a development agreement. However, California limits the opportunity to repeal a development agreement to thirty days from a local government approving the agreement.55 Thereafter, both the agreement and the proposed land development are immune from subsequent changes by referendum.56
Finally, there is the question, at least in California, of whether a legislature can declare something to be a legislative act if it is not one anyway, even though this might "take away a right reserved in the California Constitution to the people of a city to rezone by initiative."57 It is, according to the commentator just cited, the opinion of a "large Orange County law firm" that a development agreement is an adjudicative act despite the California statutory language. The issue does not arise in Hawaii, both because the State Constitution does not so provide, and because the Hawaii statute expresses a preference against such agreements being legislative acts. Other states have decided the question in the courts alone.58
California appears initially to limit agreements to cities and counties, though it contemplates coastal commissions as parties under certain circumstances. Hawaii, on the other hand, appears determined to include state, as well as federal, agencies in development agreements.
Clearly, both development agreement and annexation agreement statutes contemplate such a freeze.
The California Supreme Court in City of West Hollywood v. Beverly Towers,59 made it abundantly clear in a footnote that landowner protection from development regulation changes is a major factor in executing development agreements:60
Development agreements . . . between a developer and a local government limit the power of that government to apply newly enacted ordinances to ongoing developments. Unless otherwise provided in the agreement, the rules, regulations, and official policies governing permitted uses, density, design, improvements, and construction are those in effect when the agreement is executed.
The purpose of development agreements, said the Court, was to allow developers who need "additional" discretionary approvals to complete a long-term project regardless of changes in local regulations.
The few courts that have dealt with unilateral local government changes in land use regulations have had no difficulty in finding them inapplicable to the property subject to the agreement, provided the agreement itself is binding. Thus, in Meegan v. Village of Tinley Park,61 the Illinois Supreme Court held that the original zoning of the subject property was valid during the term of an annexation agreement and any change by the Village was void during that time. Indeed, since it was void, said the court, there was no breach by the Village.
However, Illinois courts have also held that the expiration of an annexation agreement resulted in the expiration of whatever zoning classification the landowner had bargained for in the agreement. In Bank of Waukegan v. Village of Vernon Hills,62 the landowner sued for the benefits of a zoning classification and special use permit passed and granted under an expired annexation agreement. Holding that the zoning and permits enacted the same day as the expired agreement "were provisions of the annexation agreement," and thus only enforceable "during the life of the annexation agreement," the court stated that any other result would evade the term limits of annexation agreements as set out in the applicable statute. It is not clear how a legislative act of a local government can be so automatically terminated by the expiration of an agreement. Surely the inapplicability of zoning changes in the Meegan case, due to the shield provided by the annexation agreement there, does not lead to the broad conclusion that any zoning resulting from such an agreement terminates when the agreement does.
On the other hand, careful drafting is necessary to avoid the later application of land development regulations of a different sort than those contemplated in the agreement. Thus, in a California case,63 the court held applicable to the subject property an impact fee on the ground that it was different from the land development regulations listed in the agreement as frozen. While this seems to require a certain amount of prescience from the landowner at first blush, nevertheless a local government can hardly be estopped from enforcing a new breed of land development regulations contemplated years before by neither party, under the exercise of its police power.
Whereas most development agreement and some annexation agreement statutes either contain a limitation on the duration of such agreements,64 or provide that the agreement must recite one,65 many states appear to permit annexation agreements (and some states like Nebraska, development agreements) without the benefit of a statute. It is therefore theoretically possible for an annexation agreement to be relatively open-ended with respect to such as the zoning of the subject property. The results can be unfortunate for the landowner, since it is, of course, black letter law that a landowner has no vested right in a zoning classification, absent activity which vests such rights.66 Thus, where the agreement is silent on the time period, at least one court has held that a landowner is without remedy if, a few years after annexation pursuant to an annexation agreement, the annexing local government changes the zoning to a classification which makes the originally-contemplated land development impossible.67
2. Nonperformance of a bargained-for act: dedications, contributions and hook-ups. Equally common is the failure of landowner or local government to live up to the other terms of the agreement, generally by failing to provide a public facility or money therefore,68 or by refusing to provide such as utility services to the subject property. Under such circumstances, the courts have been strict in forcing the parties to live up to their bargains, even when unusual difficulties would appear to render such performance nearly impossible. Thus, in the California case of Morrison Homes Corporation v. City of Pleasanton,69 the court of appeals directed the local government to provide sewer connections to the landowner's property as agreed in an annexation agreement, even though a superior governmental entity, a state regional water quality control board, ordered the local government not to do so. After deciding that the agreement did not amount to the City's illegally contracting away its police power, the court said: "The onset of materially changed conditions is not a ground for voiding a municipal contract which was valid when made, nor is the contracting city's failure to have foreseen them."
In much the same vein, the Colorado supreme court refused a landowner's request that roughly $25,000 in payments to a local government for acquisition of parks, playgrounds and schools be returned on the ground that the annexation agreement requiring such payment was ultra vires.70 Said the court:71
The plaintiff wanted water and sewer services; the City required annexation and a sum of money equal to eight per cent of the appraised value of the property. Each got what it bargained for . . . We see no reason, legal or moral, why plaintiff should have all of the benefits of its bargain by which it obtained the water and sewer services it needed in order to carry out its plans, and yet receive back from the city a portion of the consideration which it gave in order to obtain these services.
Of course, as intimated in the foregoing case, the agreement itself must be binding. Thus, the Illinois appellate court in Village of Lisle v. Outdoor Advertising Company,72 refused to enforce a local government ordinance banning certain signs and billboards on the property subject to an annexation agreement while the property was not contiguous to the village, on the ground that the agreement was therefore invalid and unenforceable.
A municipality is under no legal obligation in the first instance to annex contiguous territory, and may reject a petition for annexation for no reason at all. It follows then that if the municipality elects to accept such territory solely as a matter of its discretion, it may impose such conditions by way of agreement as it sees fit. If the party seeking annexation does not wish to annex under the conditions imposed, he is free to withdraw his petition to annex and remain without the city.
Courts have developed the "reasonable relationship," "specifically and uniquely attributable," and "rational nexus" tests in order to determine the constitutionality of development exactions. These tests were originally formulated to assess the validity of on-site development exactions. These same tests, however, have been applied to off-site impact fees, are likely to be applied to linkage regulations, and may be relied upon to challenge development agreements. Whereas off-site impact fees and linkage regulations are used to fund improvements necessitated by development in the region as a whole, rather than for needs more directly attributable to the new development, development agreements seeking to extract funds for tenuously related off-site benefits are sufficiently analogous to invite challenge under the same standards.78 Whether or not development agreements successfully avoid or survive such challenges may depend upon how willing the courts are to accept a return to the underlying "voluntary" rationale.
The argument has been made that exactions agreed to under a voluntary development agreement must bear a rational nexus to the needs created by the development.79 The argument states that the "rational nexus" and "substantial advancement" standards of Nollan, and presumably Dolan, are not limited to just those instances where the municipality requires an exaction from an uncooperative landowner, but apply to voluntary permit conditions as well. Under this view, the type and extent of exactions permissible under development agreements would not differ from the type and extent available under other, traditional exaction mechanisms such as impact fees.
The rationale supporting such a view is that requiring the Nollan standard to be satisfied serves to prevent governmental abuse of the mechanism, as it is "difficult to tell whether a landowner's acceptance of a condition is truly voluntary or is instead a submission to government coercion."80 "A municipality could use . . . regulations to exact land or fees from a subdivider far out of proportion to the needs created by his subdivision in order to avoid imposing the burden of paying for additional services on all citizens via taxation. To tolerate this situation would be to allow an otherwise acceptable exercise of police power to become grand theft."81
A responsive argument is that while it is true that the right to develop on one's own land is not a governmental benefit, the right to develop is not the bargaining chip being tendered by the government in a development agreement. The authorities cited in support of the nexus argument deal with exactions imposed as required conditions to development. In the case of a development agreement, the municipality is not granting the landowner the right to develop or imposing conditions on such development, but is promising to protect the developer's investment by not enforcing any subsequent land use regulation that may be detrimental to the project. The developer does not require any such guarantee in order to exercise his right or privilege to build, and may certainly choose to proceed without it. To the extent that the developer chooses to avail himself of such a guarantee, and to negotiate for it, it could be argued that the development agreement does indeed convey a "governmental benefit" upon the developer, since "[i]t is well established that there is no federal Constitutional right to be free from changes in land use laws."82 Other courts have persuasively argued that a "voluntary" fee payment is not an exaction at all.83 Therefore, any nexus/proportionality analysis would be altogether inappropriate. The municipality should therefore be free to negotiate its best terms in exchange for the benefit conferred.
2. Parties. All parties to the agreement should be named and their capacities to enter into the agreement clearly stated. In the case of developer/owners, their equitable or legal interests in the property should be stated. In the case of government entities, their authority to enter into development agreements should be recited.
3. Relationship of the Parties. The relationship between the parties to the agreement should be stated clearly. Typically, the statement will specify that the relationship is contractual and that the owner/developer is an independent contractor, and not an agent of the local government.
4. Property. The property to be subject to the agreement should be clearly and thoroughly identified. An attachment, preferably with a map, specifically describing the property should be provided and incorporated into the agreement by reference.
5. Authorization. The state and local government legislation under which the parties are enabled and authorized to enter into the agreement should be cited. This is particularly important in the event a state agency is a party. The ordinance or resolution by which the agreement has been approved by the local government legislative body should be cited.
6. Intent of the Parties. The intent of the parties to be bound by the terms of the agreement should be clearly stated.
7. Recitation of Benefits and Burdens. The parties should recite the benefits each expects to gain from entering into the agreement, as well as the burdens each agrees to bear. Because the agreement will be treated as a contract, the consideration each party is to receive from the other should be stated clearly in order to ensure enforceability. It is especially crucial that the benefits to the local government and community be expressed in terms which exhibit the agreement as consistent with - or as an exercise of - the police power. Stressing such benefits may help protect the agreement against a bargaining-away-the-police-power challenge.
8. Notice and Hearings. The date upon which the statutorily required public hearing was held should be noted, as well as all relevant findings resulting from such hearing. All other pertinent notice and hearing requirements should be recited.
9. Consistency with Plans. The findings of the local legislative body that the agreement is consistent with the local government's plans (if applicable) must be stated.
10. Administrative Act/Legislative Act. The agreement should state that it is deemed to be an administrative act or legislative act of the government body made party to the agreement. The relevant section of the enabling statute should be cited. While this does not guarantee a court will so treat it, it raises the inference that it will.
11. Applicable Land Use Regulations. The agreement should contain a precise statement of all land use regulations to which the development project will be subject. The agreement should specify precisely which regulations will apply to the project regardless of future changes, or otherwise be affected by the agreement. The statement should make it clear that regulations not specifically so identified will not be affected by the terms of the agreement, and will be subject to enforcement and change under the same criteria that would apply if no agreement were in effect.
12. Status of Applicable Land Use Regulations and Plans. The agreement should contain a statement that no applicable land use regulations or plans are currently under review or reconsideration, and that there are no legal challenges to the validity of such regulations or plans pending.
13. Approval and Permit Requirements. As far as possible at the time the agreement is written, the parties should specify all discretionary approvals and permits which will have to be obtained before the development can proceed beyond its various stages. Permits and approvals obtained prior to execution of the agreement should be specified. Any and all conditions precedent to the obtaining of permits and approvals should be listed.
14. Permitted Uses Under the Agreement. The agreement should specifically identify elements of development required by statutes. For example, under Hawaii's Development Agreement Statute, the agreement must specify:
(1) the permitted uses of the property; (2) the density or intensity of use; and (3) the maximum height and size of proposed buildings.
15. Uses Prohibited by the Agreement. The parties to the agreement are free to set limits to permissible uses beyond those specified by the applicable zoning classification. All additional limits and requirements should be clearly stated.
16. Dedications and Reservations. The agreement should provide, where appropriate, a statement of all reservations or dedications of land for public purposes as are required pursuant to laws, ordinances, resolutions, rules or policies in effect at the time of entering into the agreement. The agreement should also state all reservations or dedications which are permitted under existing laws at the time the agreement is entered, and to which the parties have agreed.
17. Utility Connections. All water and sewer service, either to be provided by the developer or by the local government, should be described in detail, together with schedules of construction completion (if not existing), cost allocation (between or among developers and government and later developers) and hookup or connection schedules.
18. Duration of the Agreement. The agreement should state a termination date. It should also specify project commencement and completion dates, either for the project on the whole, or for its various phases. The agreement should specify that the termination date can be extended by mutual agreement, and that commencement and completion dates may also be extended.
19. Amendments, Cancellation or Termination. The agreement should recite the statutory conditions under which the agreement can be amended, canceled or otherwise terminated.
20. Periodic Review. The agreement should provide for periodic reviews of the project in order to determine compliance with the terms of the agreement, as required by statute and ordinance, if appropriate. The agency responsible for performing such reviews should be identified and specific times for such reviews should be stated. Procedure should be developed and specified for dealing with situations in which minor and major noncompliance is discovered.
21. Progress Reports. If the parties agree, the agreement should specify that progress reports should be made available to the local government agency involved by the developer at specified intervals, or upon completion of specified phases of the project, or at whatever time periods the parties choose.
22. Remedies. Remedies for breach on the part of either party should be provided. Specific remedies for specific breaches should be stated, if possible. The agreement should include a statement clarifying whether the remedies stated in the agreement are to be exclusive, or whether other statutory or common law remedies will also be available.
23. Enforcement. The agreement should specify that the agreement shall be enforceable, unless lawfully terminated or canceled, by any party to the agreement or any party's successor in interest, notwithstanding any subsequent changes in any applicable law adopted by the county entering into the agreement which alters or amends the laws, ordinances, resolutions, rules or policies frozen by the agreement.
24. Hold Harmless Clause. If the parties so agree, the agreement should contain a clause whereby the developer/property owner holds the local government and its agents harmless from liability for damages, injury or death which may arise from the direct or indirect operations of the owner, developer, contractors, and subcontractors, which relate to the project.
25. Insurance, Bonds. Any insurance coverage required and/or secured by either party to the agreement, and affecting any aspect of the development project, should be specified. Existing performance bonds should be listed in detail, as well as bonds not yet obtained but required as conditions precedent for final approval of the subdivision plan. Applicable ordinances relating to bond requirements should be cited.
26. Severability Clause. The agreement should include a clause specifying that the provisions of the agreement are severable, if the parties so agree. Any limitations upon the severability of any particular clause or clauses should be clearly stated.
27. Merger Clause. A merger clause or other statement should be provided specifying that the terms of the agreement as stated in the written document are both a final and complete expression of the parties' intentions.
28. Statements of Incorporation by Reference. All documents related to the agreement or otherwise attached or appended thereto should be expressly stated to be incorporated into the agreement by reference. These might include lists of conditions, schedules of completion for public facilities, imposition of dedications, impact fees, and development plans and specifications.
29. Cooperation. The agreement should include a statement of the extent to which the local government will cooperate with the owner in his efforts to secure required permits from nonparty government agencies.
30. Subsidiary or Collateral Agreements. If the owner has obtained additional agreements relating to the development project from any nonparty agencies or persons, such agreements and the parties thereto should be specified.
31. Conflict of Laws. Procedures should be specified for dealing with situations in which changes in laws promulgated by nonparty government bodies (state or federal) might preempt or otherwise affect county laws frozen by the agreement.
2. City of West Hollywood v. Beverly Towers, 805 P.2d 829, 334, n.6 (1991).
3. Siemon, Larsen and Porter, Vested Rights: Balancing Public and Private Development Expectations (1982).
4. 553 P.2d 546 (Cal. 1976).
5. California Office of Planning and Research, The California Planning Book of Costs (1990); Curtin, "Development Agreement Practice in California and Other States," 22 Stetson L. Rev. 761 (1993); see also Cowart, Kresmodel and Stewart, "Development Agreements: Widespread Use Exceeds Expectations," Quarterly Report, Center for Real Estate and Urban Economics, University of California, Berkeley, 1986:4.
6. 653 P.2d 766 (Haw. 1982).
7. Bosselman and Stroud, "Mandatory Tithes: The Legality of Land Development Linkage," 9 Nova L.J. 381 (1985).
8. E.g., Cederberg v. City of Rockford, 291 N.E.2d 249 (1972); Carlino v. Whitpain Investors, 453 A.2d 1385 (1982); State ex rel. Zupancic v. Schimenz, 174 N.W.2d 533 (1970).
9. Arizona: § 9-500.05 Ariz. Rev. Stat. Ann. (1990) (adopted 1988); California: § 65864 Cal. Gov't Code (West 1983) (adopted 1979); Colorado: § 24-68-102 C.R.S. (1988) (adopted 1987); Florida: § 163.3220 Fla. Stat. Ann. (West 1990) (adopted 1986); Hawaii: § 46-121 Haw. Rev. Stat. (1985) (adopted 1985); Idaho: § 67-6511A I.C. (1991) (adopted 1991); Louisiana: § 33:4780.21 La. R.S. (1990) (adopted 1988); Maryland: § 13.01 Md. Code, Art. 66B, (1957); Nevada: § 278.0201 N.R.S. (adopted 1985); New Jersey: § 40:55D-45.2 N.J. Stat. Ann. (adopted 1987).
10. Illinois: IL ST CH. 65 § 5/11-15.1-1; California: Cal. Pub. Util. Code § 26406; Minnesota: MN ST § 414.0325; North Carolina: NC ST § 160A-58.21 (1989).
11. Morrison Homes Corp. v. City of Pleasanton, 130 Cal. Rptr. 196, 202 (1976) (citing Carruth v. City of Madera, 43 Cal. Rptr. 855, 860 (1965)).
12. Carlino v. Whitpain Investors, 453 A.2d 1385 (Penn. 1982).
13. Cederberg v. City of Rockford, 291 N.E.2d 249 (Ill. 1972). See Houston Petroleum Co. v. Automotive Products Credit Ass'n, 87 A.2d 319 (N.J. 1952): "Contracts thus have no place in a zoning plan and a contract between a municipality and a property owner should not enter into the enactment or enforcement of zoning regulations," Id. at 322; See also Zahodiakin Engineering Corp. v. Zoning Bd. of Adjustment, 86 A.2d 127 (N.J. 1952).
14. Kramer, "Development Agreements: To What Extent Are They Enforceable?" 10 Real Estate L.J. 29 (1981); Kessler, "The Development Agreement And Its Use In Resolving Large Scale, Multi-Party Development Problems," 1 J. Land Use & Int'l L. 451 (1985).
15. See Stone v. Mississippi, 101 U.S. 814 (1879); Corporation of the Brick Presbyterian Church v. Mayor, Alderman and Commonalty of the City of New York, 5 Cowens (N.Y.) 538 (1826), discussed in Kramer, "Development Agreements: To What Extent are they Enforceable?," 10 Real Estate L.J. 29, 37-39 (1981).
16. E.g., V.F. Zahodiakin Corp. v. Zoning Board of Adjustment,86 A.2d 127 (N.J. 1952) and Hartnett v. Austin, 93 So.2d 86 (1956).
17. Giger v. Omaha, 442 N.W.2d 182, 192 (Neb. 1989).
18. Geralnes B.V. v. City of Greenwood Village, Colorado, 583 F. Supp. 830 (D. Colo. 1984).
19. 583 F. Supp. 830, 839.
20. Rockville v. Brookeville Turnpike Constr. Co., 228 A.2d 263 (Md. 1967); Union Nat'l Bank v. Glenwood, 348 N.E.2d 226 (Ill. 1976); French v. Lincolnshire, 335 N.E.2d 29 (1975); Beshore v. Town of Bel Air, 206 A.2d 678 (Md. 1965).
21. Continental Development Corp. v. Hart, Superior Court/California for County of Los Angeles, No. C617808, Oct. 21, 1986; Lincoln Property Co. v. City of Torrance, Superior Court/California for County of Los Angeles, No. C607339, Nov. 4, 1986.
22. Lincoln Property, at p.3, slip opinion.
23. Stephens v. City of Vista, 994 F.2d 650 (9th Cir. 1993).
24. 130 Cal. Rptr. 196 (1976).
25. Stephens, 994 F.2d at 655.
26. Id. at 657.
27. 392 P.2d 467 (Colo. 1964).
28. Id. at 473.
29. For commentary supporting this view, see Holliman, "Development Agreements and Vested Rights in California," 13 Urb. Law. 44 (1981) [hereinafter Holliman], and Callies, Preserving Paradise: Why Regulation Won't Work, 1994. Kessler, supra; Hagman, "Development Agreements," 3 Zoning & Plan. L. Rep. 65 (1980); Sands & Libonati, Local Government Law, Ch. 16 (D. Callies) "Land Development Regulations," § 16.55; Abbot, Callies and Holliman, Development Agreements and Vested Rights: A Second Look (1983); League of California Cities, Development Agreements (1980); Zeid, Land Use Planning By Agreement: The Practice in England and California (Draft L. Rev. note); Curtin, California Land Use and Planning Law (1986); Mandelker, Land Use Law (1982) at § 6.21; Kramer, supra.
30. U.S. Const., art. I, § 10, cl. 1.
31. United States Trust Co. v. New Jersey, 431 U.S. 1, 18, n.14 (1977). For a full discussion see Wegner, "Moving Toward the Bargaining Table: Contract Zoning, Development Agreements, and the Theoretical Foundations of Government Land Use Deals," 65 N.C. L. Rev. 957 at 995-1003 (making the case that although writers have simply assumed that development agreements are contractual in nature, it would be more correct to characterize development agreements as possessing a hybrid contractual-regulatory nature).
32. Sigg, "California's Development Agreement Statute," 15 SW. L. Rev. 695 (1985).
33. See Holliman, supra at 50.
34. U.S. Trust Co., 431 U.S. at 21 (citing Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 434-440 (1934)).
35. 438 U.S. 234 (1978).
36. U.S. Trust Co., 431 U.S. at 25.
37. For a thorough discussion of the U.S. Trust Co.-Allied Structural Steel test, see Anthony v. Kualoa Ranch, Inc., 736 P.2d 55 (Haw. 1987). In Anthony v. Kualoa Ranch, Inc., the Hawaii Supreme Court applied the contracts clause doctrine in striking down a state statute requiring landlords to pay for leasehold improvements, at the tenant's option, as an unconstitutional impairment of contractual rights. See Holliman, supra at 52; see also Sigg, supra at 720-22; Kramer, supra at 35. For an exhaustive discussion of the reserved powers doctrine and its applicability to local government contracts (and its contract clause limitations), see Griffith, "Local Government Contracts: Escaping From The Governmental/Proprietary Maze," 75 Iowa L. Rev. 277 (1990).
38. 140 P.2d 392 (Cal. 1943).
39. 43 Cal. Rptr. 855 (1965).
40. Id.; see Denio, 140 P.2d at 397.
41. See Kramer, supra at 41; Callies & Grant, "Paying for Growth and Planning Gain," 23 Urb. Law. 221 (1991); Wegner, "Moving Toward the Bargaining Table: Contract Zoning, Development Agreements, and the Theoretical Foundations of Government Land Use Deals," 65 N.C. L. Rev. 957 (1987); Griffith, "Local Government Contracts: Escaping from the Governmental-Proprietary Maze," 75 Iowa L. Rev. 277 (1990); Carruth v. City of Madera, 43 Cal. Rptr. 855 (1965).
42. Hedrich v. Village of Niles, 250 N.E.2d 791, 796 (Ill. 1969).
43. Marco Dev't Corp. v. City of Cedar Falls, 473 N.W.2d 41 (Iowa 1991).
44. Village of Orland Park v. First Federal Savings and Loan Ass'n of Chicago, 481 N.E.2d 946 (Ill. 1985).
45. Id. at 950.
46. Cal. Gov. Code Art. 2.5, Ch. 4, Title 7.
H.R.S. § 46-121, et seq., "Development Agreements," Act 48, 1985.
47. Housing Redev't Auth. v. Jorgensen, 328 N.W.2d 740 (Minn. 1983).
48. Morrison Homes Corp. v. City of Pleasanton, 130 Cal. Rptr. 196 (1976).
49. Meegan v. Village of Tinley Park, 288 N.E.2d 423 (Ill. 1972).
50. Mayor and the City Council of Baltimore v. Crane, 352 A.2d 786 (Md. 1976) and Housing Auth. v. City of Los Angeles, 243 P.2d 515 (Cal. 1952).
51. Giger v. City of Omaha, 442 N.W.2d 182 (Neb. 1989).
52. 903 P.2d 741 (1995).
53. See, e.g., Town v. Land Use Comm'n., 524 P.2d 84 (Haw. 1974), holding a reclassification of land by a state land use commission to be quasi-judicial, and Fasano v. Bd. of Co. Comm'rs., 507 P.2d 23 (Or. 1973), holding a rezoning to be the same, despite the general rule that such "rezonings" are generally held to be legislative in character.
54. Callies and Freilich, Cases and Materials on Land Use (1986), at 309; Hagman and Juergensmeyer, Urban Planning and Land Development Control Law (1986), at § 3.12.
55. Cal. Govt. Code § 65867.5.
56. Id. See Midway Orchards v. County of Butte, 220 Cal. App.3d 765 (1990) and commentary in Curtin, California Planning and Land Use Law (1993), at 149.
57. Hagman, supra at 70.
58. E.g., Colorado (annexation agreements legislative acts), Geralnes v. City of Greenwood Village, 583 F. Supp. 830 (1984).
59. 805 P.2d 329 (1991).
60. Id. at 334, at n. 6. See discussion in Curtin, "Protecting Developers' Permits to Build: Development Agreement in Practice in California and Other States," 18 Zoning & Planning Law Report 85 (1995).
61. Meegan v. Tinley Park, 288 N.E.2d 423 (Ill. 1972).
62. 626 N.E. 2d 245 (1993).
63. Pandee Construction Co. v. City of Camarillo, 690 P.2d 701 (1984).
64. IL ST CH. 65 § 5/11-15.1-1.
65. HRS § 46-121 (1985).
66. Callies, "Land Use: Herein of Vested Rights, Plans, and the Relationship of Planning and Controls," 2 U. Haw. L. Rev. 1 (1979).
67. Carty v. City of Ojai, 143 Cal. Rptr. 506 (1978).
68. Other items bargained for and litigated: exemptions from real estate taxes, Illinois ex. rel. Van Cleave v. Village of Seneca, 519 N.E.2d 63 (1988); exemption from environmental ordinances (which did not survive legal challenge), O'Malley v. Village of Ford Heights, 633 N.E.2d 848 (1994).
69. Morrison Homes Corp. v. City of Pleasanton, 130 Cal. Rptr. 196 (1976).
70. Colorado Springs v. Kitty Hawk Development Co., 392 P.2d 467 (1964).
71. Id. at 472.
72. 544 N.E.2d 836, 839 (1989).
73. Village of Orland Park v. First Federal Savings, 481 N.E.2d 946 (Ill. 1985).
74. See Dolan v. City of Tigard, 115 S. Ct. 2309 (1995) and discussion in chapter ___, Exactions, Dedications and Impact Fees.
75. For a contrary view which would impose the same strict nexus and proportionality requirements upon such agreements as upon "freestanding" local government development dedications, exactions and other conditions, see Starritt & Mcclannahan, "Land-Use Planning and Takings: The Viability of Conditional Exactions To Conserve Open Space in the Rocky Mountain," 30 Land & Water L. Rev. 415 (1995).
76. Colorado Springs v. Kitty Hawk Development Co., 392 P.2d 467 (1964).
77. Id. at 472.
78. See Delaney, "Development Agreements: The Road from Prohibition to 'Let's Make a Deal,'" 25 Urb. Law. 49 (1993); See also, Connors & Meecham, "Paying the Piper: What Can Local Governments Require as a Condition of Development Approval?" in Institute on Planning, Zoning, and Eminent Domain § 2.01 (concluding that even if Boston's linkage exactions are viewed as regulatory fees, they are vulnerable to being invalidated as not reasonably related to needs created by the regulated development).
79. See Crew, "Development Agreements After Nollan v. California Coastal Commission," 483 U.S. 825 (1987), 22 Urb. Law. 23 (1990), and Delaney, supra.
80. Crew, supra at 46.
81. Collis v. City of Bloomington, 246 N.W.2d 19, 26 (Minn. 1976) (statute authorizing municipalities to require dedication of land or payment of fees as condition of subdivision approval upheld as constitutional since enabling legislation and implementing ordinance limited the amount of land to be dedicated to a "reasonable" percentage of the property).
82. Lakeview Dev't v. South Lake Tahoe, 915 F.2d 1290, 1294 (9th Cir. 1990).
83. Longshore v. U.S., 77 F.3d 440 ( Cir. 1996).
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David L. Callies, AICP
Benjamin A. Kudo Professor of Law
William S. Richardson School of Law
The University of Hawaii at Manoa
**This paper is adopted and from the author's Ch. 9A on the same subject in Rohan (E. Kelly, ed.), Zoning and Land Use Controls (1997).