Does Dolan v. City Of Tigard Signify The End Of The
By MICHELLE J. ZIMET, Partner, Siemon, Larsen & Marsh, Chicago, Illinois
The United States Supreme Court has now issued its long-awaited takings opinion in Dolan v. City of Tigard, No. 93-518, which finally settles the question of:
how close must the relationship be between the projected impacts of a proposed development and a required exaction or dedication?
Writing for a majority of the Court in a 5:4 decision, Chief Justice Rehnquist answered this question by enunciating a new, two-part test for determining when an unconstitutional exaction has occurred. First, an "essential nexus" must exist between a legitimate government interest and the permit condition imposed by the local government. Second, there must be a "rough proportionality" between the exaction and the impact of the proposed development. Applying this new test, the Supreme Court found that the City of Tigard, Oregon had not justified its requirement that a store owner give up a portion of her development site for a public bicycle path and drainage improvements to an adjacent creek as a condition of a permit to double the size of her store.
What makes this case particularly interesting is that unlike many land use cases that reach the United States Supreme Court which involve relatively remarkable facts, the events in Dolan are typical of those faced daily by local planning and zoning officials. The circumstances here are as follows:
The City of Tigard, Oregon is a middle-class, middle-sized (pop. 30,000), bedroom community situated on the southwest edge of Portland. In 1973, the State of Oregon enacted a comprehensive land use management program which required all cities and counties to adopt new comprehensive plans that are consistent with statewide planning goals. Pursuant to the state's requirements, Tigard developed a comprehensive plan that is codified in its Community Development Code (CDC). The CDC requires property owners in the central business zoning district to comply with a 15% open space and landscaping requirement that limits total site coverage to 85% of the parcel. The CDC also requires new development in the central business district to dedicate land for pedestian pathways where provided for in the City's pedestian/bicycle pathway plan. In addition, Tigard adopted a master drainage plan which established that flooding would be exacerbated due to an increase in impervious surfaces associated with continued urbanization. The drainage plan therefore recommended that certain improvements be made to the Fanno Creek Basin and that the floodplain remain free of structures and preserved as a greenway. The plan proposed that the cost of these improvements would be borne by property owners along the waterways.
The Dolan family owns 11 hardware stores in the Portland, Oregon region. John Dolan (now deceased) and his wife Florence purchased the Tigard "A-Boy" store in 1970 and began working on expansion plans in 1988. The store is located on Main Street in the central business district of the city and covers approximately 9,700 square feet on the eastern side of a 1.67 acre parcel of land that includes a gravel parking lot. Fanno Creek has a year-round flow and runs through a corner of the western side of the property.
In 1991, the Dolans applied to the city to redevelop the site. The plans proposed to double the size of the store to 17,600 square feet and to pave 20,000 square feet to build a 39-space parking lot. The existing store which is located on the opposite of the parcel, would be demolished in sections as construction on the new building advanced. The second phase of the project called for an additional structure on the site for complementary businesses and for more parking. Because the project contemplated an expansion of more than fifty percent of the floor area, the application was submitted for site development review.
The Tigard City Planning Commission approved the Dolans' permit application, subject to certain conditions imposed by the Community Development Code. One of the conditions required the Dolans to dedicate the portion of their property that lies within the 100- year Fanno Creek floodplain for the improvement of a storm drainage system. In addition, because the larger store would add more traffic to the City's transporta-
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tion system, the Dolans were also required to dedicate an additional 15-foot strip of land adjacent to the flood- plain for a pedestrian/bicycle pathway. The path would be part of the City's interconnecting system of bikepaths. This dedication requirement would encompass approximately 7,000 square feet, or approximately ten percent of Dolans' property. However, the Dolans could use this dedication to meet the 15% open space and landscaping requirements of the CDC.
The Dolans then requested variances from the CDC's standards arguing that their proposed development would not conflict with policies of the city's comprehensive plan. The Planning Commission made a series of findings that rationalized its dedication requirements and justified the relationship between the dedication conditions and the projected impacts of the development. First, the Commission found that "it was reasonable to assume" that customers and employees of future uses of the site "could" use the pedestrian/bicycle pathway for their transportation and recreational needs. Second, the Commission found that creation of the pedestrian/bicycle pathway "could" offset some of the traffic demand on nearby streets and decrease traffic congestion. Third, the Commission noted that the required floodplain dedication would be "reasonably related" to the Dolan's request to expand the impervious surface of the site and the need for the city to address an increase in its flooding problems. The Tigard City Council approved the Planning Commission's final order and denied the Dolans' variance request in September, 1991.
The Dolans next appealed to the Oregon Land Use Board of Appeals (LUBA) on the grounds that the city's dedication requirements were not sufficiently related to their proposed development and that the conditions constituted an uncompensated taking of their property in violation of the Fifth Amendment which prohibits governments from taking private property for public use without just compensation. LUBA rules in favor of the City in February, 1992, finding that there was a "reasonable relationship" between the proposed development and the requirement to dedicate land along Fanno Creek for a greenway since it was undisputed that the proposed larger building and increased parking would increase the amount of impervious surfaces and runoff into the creek. LUBA also found a "reasonable relationship" between alleviating the impacts of increased traffic from the development and facilitating the provision of a pedestrian/bicycle pathway as an alternative means of transportation since the proposed development would attract larger numbers of customers and employees and their vehicles.
The Dolans appealed the LUBA decision to the Oregon Court of Appeals which also affirmed the City's position in May, 1992. And, in July, 1992, the Oregon Supreme Court agreed, noting that the City's posture was consistent with the Federal constitution and that the city had established the required "reasonable relationship" between the dedication and the impact of the expansion of the Dolans' business. The United States Supreme Court then agreed to hear Dolans' case due to an alleged conflict between the Oregon Supreme Court's decision and the Supreme Court's decision in Nollan v. California Coastal Commission, 483 U.S. 825 (1987).
The United States Supreme Court reversed, holding that the city's dedication requirements constituted an uncompensated taking of property. Chief Justice Rehnquist wrote the majority opinion, joined by Justices O'Connor, Scalia, Kennedy and Thomas. Justices Stevens, Blackmun, Ginsberg and Souter dissented, with Justice Souter writing separately. The Court held that while the city's goals of reducing flooding hazards and traffic congestion and of providing public green-ways were "laudable," and while land use planning to control increasing urbanization was "commendable," a strong public desire to improve the public condition could not justify bypassing "the constitutional way of paying for change."
Ergo, what started off as a simple trip to the city planning department for permission to expand the size of a plumbing and electrical supply store in Oregon has turned out to affect the worlds of local governments, planners, and land use lawyers. Exactions, dedications, and impact fees must now be re-evaluated in light of the Supreme Court's latest deliberations on the topic because the Court's decision makes it clear that it is not enough for a local government to rely on a presumption of validity.
In evaluating the Dolans' claim, the Court applied a new two-part legal test which examined:
(1) the nexus between the legitimate state interest and the permit condition; and
Restating this test in non-legal terms, a court must now first examine the type of public purposes the exaction is meant to remedy to determine whether there is a legitimate public interest involved and that the proposed development implicates that interest. Second, a court must now also look at whether the government has demonstrated a "rough proportionality" between the harm caused by the new land use and the benefit obtained by the condition. The following examples taken from the Dolan case should clarify the type of analysis involved in the first prong of this test:
Is there a relationship between preventing flooding and limiting development within a creek's floodplain?
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Does a nexus exist between reducing traffic congestion and providing alternative means of transportation, such as a bikepath?
Examples of the second prong of the analysis include:
Has the local government proven that the creation of a bikepath would offset some of the traffic demand on nearby streets?
In evaluating whether Tigard's planning commission's findings were constitutionally sufficient to justify the conditions imposed on the Dolans' building permit, the Supreme court reviewed the standards by which several different state courts have treated development exactions. The Court observed that a wide spectrum exists in the manner in which states have handled the issue of what is the necessary connection between the required dedication and the proposed development. The Court wrote that while "very generalized statements" is too lax a standard, the highly restrictive "specifically and uniquely attributable test is likewise unwarranted.
In refuting the test for exactions used by Illinois and a minority of other states, the Supreme Court pointed to the landmark case of Pioneer Trust & Savings Bank v. Mount Prospect, 176 N.E.2d 799 (111. 1961) which laid out the judicial criteria for assessing the constitutionality of developer exactions in Illinois. In Pioneer Trust, a developer challenged the validity of an ordinance that required the dedication of public grounds as a condition of plat approval. The Illinois Supreme Court noted that while a municipality may require a developer to provide the streets that a subdivision requires, it cannot require the developer to provide a major thoroughfare, the need for which stems from the total activity of the community. The Court further explained that in Illinois, an exaction will be held constitutional when it is within a municipality's statutory grant of power and is "specifically and uniquely attributable" to a developer's activity. In repudiating this strict standard in Dolan, the United States Supreme Court wrote:
Other state courts require a very exacting correspondence, described as the "specifi[c] and uniquely attributable" test. The Supreme Court of Illinois first developed this test in Pioneer Trust and Savings Bank v. Mount Prospect. Under this standard, if the local government cannot demonstrate that its exaction is directly proportional to the specifically created need, the exaction becomes a "veiled exercise of the power of eminent domain and a confiscation of private property behind the defense of police regulations." We do not think the Federal Constitution requires such exacting scrutiny, given the nature of the interests involved.
Internal citations omitted.
Moreover, the Court also renounced the "reasonable relationship" test that has been adopted by a majority of the state courts. Under this intermediate standard, a local government must show a "reasonable relationship" between the required dedication and the impact of the proposed development. The Supreme Court noted:
We think the "reasonable relationship" test adopted by a majority of the state courts is closer to the federal constitutional norm than either of those previously discussed. But we do not adopt it as such, partly because the term "reasonable relationship" seems confusingly similar to the term "rational basis" which describes the minimal level of scrutiny under the Equal Protection Clause of the Fourteenth Amendment.
Of paramount importance to local governments,
landowners, and developers (and the issue that caused
the rift between the majority and the dissenting justices), in elucidating what is now the standard for evaluating development exactions, the Court shifted the
burden so that governments now have the responsibility of proving the constitutionality of an exaction. Until
this time, it was the landowner challenging the land use
regulation who had the burden of proving that the
exaction would "take" all (or substantially all) of the
economically viable or beneficial use of the property.
Now, a court must therefore examine whether the government has justified its exaction by making what the
Court called an "individualized determination" that the
condition satisfies the proportionality requirement.
We think a term such as "rough proportionality" best encapsulates what we hold to be the requirement of the Fifth Amendment. No precise mathematical calculation is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.
In applying the first prong of its test, the Supreme Court held that undoubtedly the prevention of flooding along Fanno Creek and the reduction of traffic congestion in the central business district qualify as legitimate public purposes. Moreover, the Court held that it was "obvious" that a nexus existed between preventing flooding of the creek and limiting development within the 100-year floodplain. Similarly, the Court held that the essential nexus existed between the city's attempt to reduce traffic congestion by providing for alternative
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means of transportation such as a pedestrian/bicycle pathway.
However, the Court held that the City's efforts flunked the second prong of the test and therefore constituted a taking. The Court did not believe that the degree of the exactions required in the building permit conditions bore the required relationship to the projected impact of the Dolans' proposed development. Specifically, the Court found that the city had relied on the Planning Commission's "rather tentative findings" that did not show the required reasonable relationship between the floodplain easement and the Dolans' proposed new building. The city not only wanted the Dolans to refrain from building in the floodplain, but the Dolans' were also asked to dedicate property along Fanno Creek for its public greenway system. According to the Court, the city never showed (i.e. made an individualized determination as to) why a public greenway, as opposed to a private one, was required in the interest of flood control. Moreover, since the Dolans' proposed development did not encroach on the city's existing greenway space, it was not reasonable for the city to require them to provide some alternative greenway space for the public on their property or elsewhere.
Addressing the pedestrian/bicycle pathway, the Court held that dedications for streets, sidewalks and other public ways are generally reasonable exactions that are designed to avoid excessive congestion due to a proposed development. However, in this case, the city did not meet its burden of demonstrating that the additional number of vehicle and bicycle trips that would be generated by the Dolans' store were reasonably related to the city's requirement that land for the pedestrian/ bicycle pathway be dedicated. Rather, the city had only found that the pathway "could" offset some traffic demand and lessen the increase in traffic congestion. The Court explained that:
No precise mathematical calculation is required, but the city must make some effort to quantify its findings in support of the dedication for the pedestrian/bicycle pathway beyond the conclusory statement that it could offset some of the traffic demand generated.
Of course, the question of precisely how much planning is needed to satisfy this "some effort to quanitify" standard will undoubtedly be debated across the country, in every state and at every level of local government in the upcoming year(s). What is certain, however, is that by shifting the burden of proof from the property owner to the government, the Supreme Court has established stricter limits on the ability of governments to place conditions (especially conditions that require public access) on their approval of building permits.
Dolan v. City of Tigard is important because it demonstrates that exactions and dedications are alive and well, as are land use regulations that protect sensitive lands such as floodplains. Moreover, because the Court does not require exactitude in justifying exactions, governments that have done a good job of planning (i.e. their exactions are roughly proportionate to the impact caused by a proposed development) will be protected from Dolan fall-out. Again, however, development exactions and dedications no longer have a presumption of constitutional validity and courts will use a heightened level of scrutiny in their evaluation. In general, initial observations of Dolan can be categorized as follows:
The Supreme Court has spoken and Dolan should be taken seriously. The decision clearly reaffirms the validity of development exactions, but holds that local governments should do their homework to justify their exactions, both qualitatively and quantitatively. More-over, where constitutional issues are involved, the traditional "tests" for determining the constitutionality of exactions that have been used by state courts (i.e. the "specifically and uniquely attributable test" in Illinois) will now be forsaken in favor of the Court's new two-pronged test.
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