National Impact Fee Roundtable Tyson Smith, AICP, Esq. White & Smith, LLC 255 King Street Charleston, SC 29401 Phone: (843) 937-0201 Email: tsmith@planningandlaw.com 2009 Case Law Update This is an overview of some of the significant cases decided by state and federal courts since our update last October. I will be discussing some of the more interesting ones during our presentation at lunch on Friday. Hope to see you there. Case Name and Homebuilders Association of Central Arizona v. City of Prescott, Town of Prescott Valley, Sup. Ct. Yavapai County, AZ, March 25, 2009 (CV 2006-1259). Trial court has granted summary judgment to City of Prescott and Town of Prescott in regard to Homebuilders' claims that both municipalities were violating Arizona state law that allows municipalities to assess development fees. A.R.S. 9-463.05(B) allows municipalities to assess development fees, if certain requirements are met. Both municipalities assess development fees on residential development, but not on non-residential development (City does not assess residential development fees, and Town has suspended assessment of such fees). Homebuilders claimed both municipalities were violating that statute because neither imposed fees on non-residential development, and that the statute imposed a non-discretionary duty to assess fees in a non-discriminatory manner. Court found that City's rational for not imposing fees on non-residential development was a legislative finding, based on a factual determination that should not be second guessed by the courts. City made a conscious decision to not impose such fees after considering contributions made or to be made in the future in cash or by taxes, fees or assessments by the non-residential property owner towards the capital costs of the necessary public service covered by the development fee, as required by the plain language of the statute. The fee was not imposed because the contributions considered outweighed the amount of the development fee that would otherwise be assessed. Since City's legislative determination was not found to be clearly erroneous, arbitrary, or wholly unwarranted, Court acquiesced in the City's determination and found that City did not violate the statute. Court accepted Town's argument that Town created two classes that are similarly situated, residential and non-residential, and as long as Town did not discriminate between persons within those classes, the classes may be treated differently. Town was assessing its development fees in a non-discriminatory manner; Town was not violating statute. Court rejected City's and Town's contention that Homebuilders' claims were time-barred because notice of claim was not timely given; Court found that each time a non-residential 1
Homebuilders Association of Central Arizona v. City of Mesa, Sup. Ct. Maricopa County, AZ, June 12, 2009 (LC2007-000559-001 DT). building permit was issued, it could be argued that a new cause of action accrues. Court rejected Town's contention that Homebuilders failed to exhaust administrative remedies, due to the fact that Town's argument cited language inapplicable to the issue at hand. Trial court has denied Homebuilders' motion for summary judgment regarding Homebuilders' Special Action alleging that the Cultural Impact Facilities Fee imposed by the City of Mesa as part of the development impact fees assessed upon new development was outside the authority granted to municipalities by A.R.S. 9-463.05. City had an Impact Fee Study prepared which analyzed the cost of cultural facilities provided by City. The study explained that the Cultural Facilities Fee represented a projection of the pro-rata per-unit share of the cost of construction of new or expanded cultural facilities which would be needed in order to maintain the existing level of service facilities provided by City. Soon after, City Council passed an ordinance amending preexisting development impact fee ordinances, which increased the aggregate impact fee but decreased the Cultural Facilities Fee. Homebuilders filed action contending that cultural facilities were not "necessary public services to a development" and that the Cultural Facilities Fee did not provide "benefit" to a particular development. Court found that statute did not specify which public services are "necessary," and that City Council's determination that cultural facilities were necessary was neither arbitrary nor lacking a rational relation to legitimate municipal interest. City made determination after study and open discussion and proceedings, and the resulting findings were presumed valid by Court. While the statue required that an impact fee result in a benefit to the developer, Court rejected Homebuilders' argument that there must be a direct benefit to the developer resting on concrete plans showing the location type and character of improvements. The fee need only be factually related to the need for public services created by the development and must bear a reasonable relationship tot he public burden created by the development. 2
The Drees Company v. Hamilton Township, Ohio, et al., Ct. Common Pleas, Warren County, OH, September 30, 2009 (07CV70181). Pulte Home Corp. v. City of Manteca, Not Reported in Cal.Rptr.3d, 2009 WL 2682514, Trial court has granted partial summary judgment to Township regarding Company's assertion that impact fees imposed by Township on new construction constituted an illegal tax, were not permissible fees, and that Township's action was preempted by other statutory funding schemes. Township was a limited home rule township created under state statute, which allowed Township to "exercise all powers of local self-government... other than powers that are in conflict with general laws, except that the township... shall enact no taxes other than those authorized by general law." Township Board of Trustees passed the "Amended Resolution Implementing Impact Fees within the Unincorporated Areas of Hamilton Township, Ohio, for Roads, Fire, Police, and Parks," which assessed fees whenever someone applied for a zoning certificate for new construction or redevelopment. Only residential units were charged the impact fee, and collected fees were kept in accounts for each of four categories of impact fees, kept separate from Township's general fund. Each of the four accounts contained fees from all over the Township, and the lack of geographical subcategories in each account allowed for fees paid in one geographical area to be spent in another geographical area. Company and other plaintiffs paid the fees under protest. Court discussed the definition of "general law" and determined that a general law is, for the purposes of the statutory section in issue, any enactment of the Ohio General Assembly. Court found that state law allowed Township to adopt a "limited home rule government under which the Township exercises limited powers of local self government and limited police powers;" Township could enact a resolution to impose impact fees, as an exercise of its police power, so long as the resolution was not 'in conflict with" any other provision of the state code. Court determined that Township's resolution was not in conflict with any other state statute, because the resolution did not permit that which was forbidden by statute and did not forbid what was expressly allowed by statute. No state statutes regarding impact fees were referenced in the lawsuit. Court looked at state statutes regarding roads, parks, and police and fire protection, and found no "contrary directive" or "conflict by implication" between the resolution and state statutes. Court found that the fee was not a tax. Home rule townships were not allowed to impose taxes except as expressly authorized by the state general assembly, and no provision of state law granted Township the authority to impose taxes in the manner imposed in the impact fee resolution. After analyzing the substance, not merely form, of the assessments, Court found that Township treated all impact fee payers as a class, and that fees paid were used for improvements that benefited the class of fee payers and were not shown to benefit the class of non-fee payers; thus, the impact fee was not a tax. Court rejected Company's averment that the impact fee resolution established or revised subdivision regulations in violation of state law, because there was nothing in the resolution that required or forbade development in any particular part of Township. The resolution was sufficiently narrowly-tailored to merely provide for funding of public services for new development to the class of fee payers in exchange for fees. Court of Appeals reversed judgment of trial court finding that City was imposing an increased "government building facilities" development fee in contravention of the development agreements between the builders and City, and that builders had a vested right to pay the lesser amount of the original facilities fee. 3
Cal.App. 3 Dist., August 28, 2009 (No. C058744). Review filed, October 8, 2009. In 1986 City adopted an ordinance requiring government building facilities fee of $350, which made no provision for any future adjustments in the amount of the fee. In 2003 City adopted two different ordinances that continued to require the fee, giving a reference for City's authority to impose the fee and stating that the fee specifically applied to permits for the erection or construction of a new dwelling unit. The ordinances made no provision for any future adjustment in the amount of the fee. City entered into development agreements with several entities, one of which was Pulte in 2005. Then, in 2006, City adopted an ordinance amending its municipal code to greatly increase the government buildings facilities fee per unit, and provided that the amount of the fee would be updated annually and that developers would be required to pay the fees in place at the time payment was due. City then began requiring builders to pay the increased facilities fee, which Pulte paid under protest. Pulte sued City, and the case was consolidated with another builder's case (Morrison) for limited purposes, including a "vested rights" argument that the increased fee could not be enforced against Pulte and Morrison, based on the terms of the development agreement, a government code section, estoppel, and (regarding Pulte) a vesting tentative map. Trial court entered judgment for builders, on the "vested rights" ground. City appealed. Court of Appeals found that the trial court erred in concluding City was bared by terms of development agreements with builders from imposing the increased facilities fee in 2006. Court of Appeals found that the thrust of the development agreements, both made effective in 2005, was to require the developers to pay all city fees relating to new development that were in force and effect on the effective dates of the agreements. Pulte contended that the increased facilities fee implemented in 2006 was a new fee, different from the facilities fee that was in effect when they entered into the development agreements, rather than simply an adjustment or increase to the existing facilities fee. Court of Appeals agreed with City that it did not enact a new fee, it merely increased the amount of the existing fee and provided for future increases in the fee, and that the purpose of the fee was to fund the expansion of government center facilities in general. The facilities fee provided for under the 2006 amendment to the city's municipal code did not simply have the same label as the facilities fee already in existence at that time; its purpose was also the same-to fund new and improved government facilities and buildings necessitated by new development. Court of Appeals analyzed the language of the development agreements and found that nothing in the development agreements purports to limit the authority of the city to increase, prior to building permit issuance, the amount of the impact fees that were in effect when the agreements took effect, including the facilities fee. Further, the trial court erred in accepting Pulte's argument that City had no authority to increase the facilities fee imposed on the projects unless some specific provision in the agreements gave the city that authority. Court of Appeals rejected Pulte's arguments regarding the government code, "equity and estoppel," and "vested rights under a vesting tentative map." By agreeing to pay the amount of the facilities fee in force and effect at the time of building permit issuance, by acknowledging that the city could adjust the amount of its impact fees from time to time during the life of the project and the development agreement, and by entering into an agreement that contained no provision precluding the city from exercising its preexisting authority to increase its impact fees between the time the development agreement took effect and the time it sought the building permits, Pulte essentially agreed to pay the city the increased facilities fee that was in force and effect at the time of building permit 4
issuance. Meyers v. County of Calaveras, Not Reported in Cal.Rptr.3d, 2009 WL 2028744, Cal.App. 3 Dist., July 14, 2009, (No. C056910). Belleau Woods v. City of Bellingham, 208 P.3d 5, 2009 WL 1449053, Wash. App. Div. 1, May 26, 2009 (No. 62041-0-I). Court of Appeals affirmed the trial court's finding that County properly included certain property in Road Impact Mitigation program, which County ordinance did not impermissibly shift burden of establishing a reasonable relationship between projects to be funded by the program and the new developments from which the fee is collected. Between 1996 and 2003, County gathered data, conducted studies, and proposed projects in reference to a Road Impact Mitigation fee program. Some of the proposals included road on Meyers' property, and some did not. In 2003, County developed three criteria for road inclusion in the program: (1) sufficient traffic volume in 2025, (2) connectivity between County communities or parallel capacity to a state highway, and (3) the need to upgrade a road to current county standards. Meyers' road was ultimately included in the program through an addendum to a technical memorandum. Court of Appeals agreed with County that Meyers' road met all three criteria for inclusion, and rejected Meyers' argument that the future increase in traffic was insufficient. County presented "plausible and logical" methodology and conclusion to nexus study that recommended inclusion of Meyers' road. Court of Appeals found that prior exclusion of the road from the program did not undermine the legitimacy of the road's later inclusion, because the road met the three criteria that were ultimately adopted. County sufficiently demonstrated a reasonable relationship between the public project to be funded and the fee to be collected from the developer. Meyers provided no evidence to refute County's evidence. Court of Appeals rejected Meyers' argument that ordinance improperly shifted the burden of establishing a reasonable relationship to an applicant rather than maintaining it on the agency. Meyers relied upon language that pertained only to the burden placed on developer to obtain a waiver of the fee without filing a protest action; the language did not pertain to the establishment of the fee. Court of Appeals reversed and remanded the Superior Court s reversal of the hearing examiner s decision that City s park impact fee was justified. In 2004, Belleau entered into a planned development contract with City, which required prerequisite consideration in the form of contribution of land or fees for neighborhood park and trail system as a condition of rezoning the property. Belleau dedicated to City a conservation easement for a public trail included in the Parks Capital Facilities Plan, in lieu of paying a total park fee of $8,912.34. In 2006, City enacted an ordinance allowing for collection of park impact fees at the time of building permit issuance, which contained a mitigation exemption from the fees, provided that any such mitigation measure was made pursuant to the capital facilities plan. In 2007, Belleau s building permit application was granted, and a park impact fee of $111,215.13 was imposed, which Belleau paid under protest. Court of Appeals agreed with City that the dedication in lieu of the $8,912.34 was a condition of rezoning, not a park impact fee, and it did not mitigate all of the parks impacts of the development. Entering into the planned contract did not give Belleau a vested right to develop the property exempt from the later-enacted park impact fee ordinance. Court of Appeals found that impact fees simply add to the cost of the project, and are not land use control ordinances; under state law, the vested rights doctrine does not apply to protection from impact fees. Also, Belleau s claim that it had a vested right, characterizing the planned development contract as a development agreement failed, 5
Anne Arundel County v. Halle Development, Inc., 971 A.2d 214, 2009 WL 1212720, Md., May 06, 2009 (No. 59, Sept. Term, 2008). because the formalities of development agreement approval were not met, and the issue was not presented to the hearing examiner. Court of Appeals agreed with City that the mitigation language in the ordinance exempts payment of the park impact fee only when all park impacts have been mitigated, not merely when any of the park impacts have been mitigated. Court of Appeals affirmed circuit court's holding that property owners in class action suit were entitled to recover development impact fees. County ordinance allowed for collection of development impact fees, which were deposited into either school or transportation special funds, and were to be used for improvements within the district from which they were collected. The ordinance contained a refund provision which required the County to give notice of the availability of a refund if the fees were not expended or encumbered by the end of the sixth fiscal year following collection, with the limited possibility of extension on the six-year limit. County purported to effectuate extensions for refund dates in order to fund projects in two districts, although County failed to (1) identify the properties that would be directly benefited by the planned improvements and (2) comply with the limitation that extensions be granted only to expend or encumber fees paid with respect to these properties. Halle and other owners filed a class action suit alleging County's failure to refund the fees (1) constituted an unconstitutional taking under the Fifth and Fourteenth Amendments, (2) violated the Owners rights under the Maryland Declaration of Rights, and (3) unjustly enriched County, creating the basis for a constructive trust. Halle's complaint was initially dismissed by the circuit court for failure to exhaust administrative remedies, which was reversed by the court of special appeals because there were no express or implied administrative remedies for the Halle to exhaust. Court of Appeals agreed with the lower courts' in finding that County was not entitled to a remand of the case to County administrative officials for the purpose of new decisions regarding the fee extensions. County failed to act validly within the required time frame, and was not entitled to take further action regarding the fees. Halle had a remedy in assumpsit; when one pays to a... local government more in... fees... than the government is entitled to, and when the law specifically authorizes a refund, although no particular statutory remedy is provided, a common law contract action... is available. Court of Appeals rejected County's argument that Halle's action to obtain refunds was time-barred. Knowledge of the ordinance alone would not prompt investigation by Halle when no notice was given that fees were available for refund, as there is a strong presumption that public officers properly perform their duties. Knowledge of the facts, not of the law, triggers the commencement of the limitations period, and Halle could not have been reasonably expected to inquire as to the fees based only on County's lack of refund notice. 6
Building Industry Ass'n of Cent. California v. City of Patterson, 90 Cal.Rptr.3d 63, 2009 WL 215144, Cal.App. 5 Dist., January 30, 2009 (No. F054785). Kamaole Pointe Development LP v. County of Maui, Not Reported in F.Supp.2d, 2008 WL 5025004, D.Hawai'i, November 25, 2008 (CV. No. 07-00447 DAE-LEK). Appellate Court reversed the trial court's holding regarding increase in City affordable housing fee. Developer obtained a development agreement and tentative subdivision maps for the construction of two residential subdivisions in City, and City allowed developers to pay a fee of $734 per house in lieu of building affordable housing. About three years later, City increased this fee to $20,946 per house and sought to apply the increased fee to Developer's two residential projects among others. Developer sued. The trial court found the increase permissible. Appellate Court reversed, finding that the amount of a development fee must be limited to the cost of that portion of a public program attributable to the development; City failed to show that the increase in its in-lieu fee satisfied that standard and, therefore, failed to show that the increase was reasonably justified as required by the development agreement. Appellate Court agreed with Developer's argument that the fee increase violated its rights under the vesting tentative map and state law. The conditions of City's approval of the vesting tentative map stated that in the event of a conflict between the Development Agreement and the vesting tentative map, the terms of the Development Agreement shall control. The Development Agreement required that the amount of an Affordable Housing fee may change, but must be "reasonably justified." Appellate Court concluded that the increase in a fee is not reasonably justified as required by the Development Agreement unless there is a reasonable relationship between the amount of the fee, as increased, and the deleterious public impact of the development. The fee calculations used by City did not support a finding that the fees to be borne by Developer's project bore any reasonable relationship to any deleterious impact associated with the project; therefore, the fee increase was not "reasonably justified" and was invalid. District Court denied Kamaole's motion for partial summary judgment, and granted in part and denied in part County's motion for summary judgment. County passed ordinance which required developers to dedicate forty to fifty percent of the total number of units or lots available in a residential development to affordable housing. In lieu of providing actual units, the Ordinance provided that the developer may either: (1) pay an in-lieu fee at the rate of 30% of the total project sales; (2) donate unimproved land valued at 200% of the in-lieu fee; or (3) donate improved land valued at 100% of the in-lieu fee. Prior to the passage of the ordinance, Kamaole had invested hundreds of thousands of dollars into the planning and design of multi-family residential projects. After determining that complying with the ordinance would render their projects economically infeasible, Kamaole appealed to the County Council for a waiver from the ordinance, which was denied. Council found that there was a reasonable nexus between the impact of Kamaole's proposed developments and the need for affordable housing on Maui. Kamaole sued. District Court found that Kamaole's substantive due process and equal protection arguments were unripe because no determination had been reached by the Council on Kamaole's development plan, and the court was in no position to assess the constitutionality of the ordinance until a final decision was made as to how the regulations will be applied to Kamaole's property. District Court found that Kamaole's procedural due process claim was ripe for review, and that a genuine issue of material fact existed as to whether a violation of procedural due process occurred in County's denial of Kamaole's waiver appeal. District Court granted summary judgment to County on Kamaole's claim that County 7
McClung v. City of Sumner, 548 F.3d 1219, 2008 WL 5049647, 9 th Cir. (Wash.), December 01, 2008 (No. 07-35231). Guggenheim v. City of Goleta, ---- F.3d ---, 2009 WL 3068152, 9 th Cir. (Cal.), September 29, 2009 (No. 06-56306). lacked statutory authority to enact the ordinance; because the ordinance's in-lieu fee did not constitute an impact fee as defined by state law, there was no conflict with or preemption by state law. Ninth Circuit Court of Appeals affirmed District Court holding that landowner's installation of 24-inch pipe did not constitute uncompensated taking, but rather, was voluntary implied contract. McClungs sought to develop their property in City, and learned that their underground storm drain pipe did not meet City's requirement for new developments to include pipes at least 12 inches in diameter. The McClungs asserted that City's subsequent request that they install a 24-inch pipe in exchange for City approving their permit application and waiving certain permit and facilities fees effected an illegal taking of their property. Court of Appeals applied Penn Central analysis to the issue of whether the ordinance effected a taking, and found that the ordinance was a law that generally did not affect existing uses of real property but rather affect proposed development, and should be upheld because the health, safety, morals, or general welfare would be promoted by doing so. Court of Appeals rejected McClungs' argument that the new pipe requirement acted as a monetary exaction and resulted in a per se physical taking of their money, and also rejected their argument that the requirement involved an individualized, discretionary exaction as opposed to a general requirement imposed through legislation. Court of Appeals held that the McClungs impliedly contracted to install a 24-inch pipe, because the McClungs revised their development plan and installed 24-inch pipe in response to a City letter giving them the option to do so and receive a fee waiver. Ninth Circuit Court of Appeals affirmed in part, reversed in part, and remanded District Court's finding that no taking had occurred as a result of City's mobile home rent control ordinance which effected a transfer of nearly 90 percent of the property value from mobile home park owners to mobile home tenants. Court of Appeals agreed with District Court that case was properly brought and ripe for decision on the rejection of due process and equal protection claims, but disagreed on the merits of the takings claim and found that a taking had occurred. Guggenheims purchased mobile home park located in an unincorporated part of the County, which later was incorporated into City. Before and after incorporation, the property was subject to the County, and then the City, Rent Control Ordinance (RCO). After incorporation, Guggenheims brought suit against City alleging facial challenges to the RCO on takings, due process, and equal protection grounds. After three rounds of litigation at the trial level, the appeal reached the Ninth Circuit for the case at hand. Court of Appeals found that undisputed evidence showed that the mere enactment of the RCO caused a significant economic loss for the Guggenheims, and that the economic impact and character of the governmental action tests weighed strongly in the Guggenheim's favor, though the investment-backed expectation factor did not. Finding that a "classic taking" occurred, the court held that City should compensate Guggenheims in accordance with the takings clause. If you have any questions or need additional copies of this overview, feel free to contact me. A word of caution: While I have included the cases most relevant to the impact fee practitioner, not all cases that could affect your jurisdiction or your practice are included here. Not too that several of these cases are unreported or on appeal. You should consult your attorney for purposes of addressing particular issues in your jurisdiction. 8