LAND USE AND ZONINGLITIGATION: AN

OVERVIEW AND UPDATE

PRESENTED TOTHE REAL PROPERTY SECTION OF

THE DALLAS BAR ASSOCIATIONDALLAS LEGAL EDUCATION CENTER

DALLAS, TEXASJUNE 14, 1999

ROBERT F. BROWNBICKERSTAFF, HEATH, SMILEY, POLLAN, KEVER & McDANIEL, L.L.P.

1717 MAIN STREET, SUITE 3000DALLAS, TEXAS 75201

(214) 752-8021(214) 753-0200 - FAX

I.

INTRODUCTION

This paper attempts to provide an overview of the potential constitutional causes of actionthat may be asserted against local government as a result of their zoning and land use decisions.Special emphasis is given to (1) last year’s Texas Supreme Court’s decision in Mayhew v. Town ofSunnyvale, 964 S.W.2d 922 (Tex. 1998), and the investment-backed expectations test discussedtherein, (2) the debate over the application of Dolan v. City of Tigard, 512 U.S. 374 (1994), and its“rough proportionality” test, and (3) the constitutionality of growth management techniques andgrowth moratoria, both of which are the subject of recent media coverage due to several North Texascities that have recently adopted such measures.

II.

CHALLENGES TO ZONING DECISIONS

While there are a number of potential theories under which a disgruntled landownerconceivably could challenge a municipality’s zoning decision, ranging from the far flung to moreconventional attacks, there are several fairly established categories of land use and zoning challengesthat may be used as a framework within which to analyze any zoning or land use decisions. Thesegeneral categories are as follows:

1. Just Compensation Takings Claim. This claim arises when a landowner asserts thatthe zoning or land use decision applied to his property constitutes a taking of his property withoutjust compensation in contravention of the Fifth and Fourteenth Amendments to the United StatesConstitution. The remedy usually sought in this type of challenge is just compensation.

2. Due Process Takings Claim. In this challenge, a landowner claims that the zoningor land use regulation applied to his property goes too far and destroys the value of his property tosuch an extent that it amounts to a taking by eminent domain without due process of law. Theremedy sought in this challenge is typically the invalidation of the zoning or other land use regulation.

3. Arbitrary and Capricious Substantive Due Process Claim. A landowner mayclaim that the zoning regulation or other land use decision is arbitrary and capricious in that it doesnot bear a substantial relation to the public health, safety, morals or general welfare. This type ofchallenge may be brought under either a facial or "as applied" attack.

4. Equal Protection. An equal protection challenge may be based upon an assertion thatthe zoning regulation or other land use decision unfairly impacts upon a suspect class, which wouldinvolve a strict scrutiny review, or results in an economic discrimination, which would involve arational basis review.

5. Procedural Due Process. This last category involves an attack whereby a landownerclaims that he has been deprived of procedural due process in the manner in which the zoning or otherland use regulation has been enacted.

The foregoing challenges may be brought under both the United States and TexasConstitutions.

A. Taking Challenges In General

1. Federal Taking Analysis

In Agins v. City of Tiburon, 447 U.S. 255 (1980), the United States Supreme Court set outthe test to determine if a land use regulation amounts to a taking.

The application of a general zoning law to particular property effects a taking if theordinance does not substantially advance legitimate state interests [citation omitted],or denies an owner economically viable use of his land [citation omitted].

Id. at 260. See also Nollan v. California Coastal Comm'n, 483 U.S. 825, 834 (1987). The Court hasalso acknowledged, however, that it has developed no "set formula to determine where regulationends and taking begins." MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 348 (1986).

In Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), the Courtapplied the taking clause to a land use case when it upheld the designation of Grand Central Stationas an historic landmark, and upheld the city's refusal to allow the construction of a high rise buildingin the air space above the station. The Court enumerated the factors to be considered in applying thetaking clause. The first consideration is the economic impact of the regulation on the claimant andthe extent to which the regulation interferes with "distinct investment-backed expectations." Id. at124. The Court noted, however, that "the submission that appellants may establish a `taking' simplyby showing that they have been denied the ability to exploit a property interest that they heretoforehad believed was available for development is quite simply untenable." Id. at 130.

The Court further wrote that "government may execute laws that adversely affect recognizedeconomic values," such as exercises of the taxing power. More important, the Court added, werecases that upheld "land-use regulations that destroyed or adversely affected recognized propertyinterests. . . . Zoning laws are, of course, the classic example. . . ." Id. at 125. The Penn Centralcase, and the taking guidelines stated therein, impose a significant burden on landowners whochallenge zoning laws and other land use decisions as a taking due to a mere diminution in propertyvalue.

In any taking analysis, the initial inquiry is whether the challenged governmental actionadvances a legitimate public interest. Agins, 447 U.S. at 260; Penn Central, 438 U.S. at 125. Thesecond step in a taking analysis examines whether the challenged governmental action denies an

owner the economically viable use of his land. Agins, 447 U.S. at 260. In reviewing this part of thetaking analysis, it is important to note that the Fifth Amendment's prohibition against taking withoutcompensation does not guarantee the most profitable use of property, Goldblatt v. Hempstead, 369U.S. 590, 592 (1962), and a diminution in value, standing alone, does not establish a taking. SeeHadacheck v. Sebastian, 239 U.S. 394, 405 (1915) (restriction that devalued property byapproximately 90%, from $800,000 to $60,000, upheld); Village of Euclid v. Amber Realty Co., 272U.S. 365, 384 (1926) (zoning regulation sustained even though the restriction reduced the value ofthe property by 75%); Pace Resources, Inc. v. Shrewsbury Township, 808 F.2d 1023, 1031 (3d Cir.1987) (reduction in value from $495,600 to $52,000 held not a taking); Pompa Constr. Corp. v.Saratoga Springs, 706 F.2d 418, 420 n.2 (2d Cir. 1983) (use restriction which devalued property byapproximately 77% was not a taking). Penn Central, 438 U.S. at 131. Taking issues must beresolved by focusing not on the uses regulations deny, but rather on the uses that regulations permit.Id. As stated in City of Eastlake v. Forest City Enterprises, Inc., 426 U.S. 668, 674 n.8 (1976)(citations omitted):

By its nature, zoning "interferes" significantly with owners' uses of property. It ishornbook law that "[m]ere diminution of market value or interference with theproperty owner's personal plans and desires relative to his property is insufficient toinvalidate a zoning ordinance or entitle him to a variance or rezoning."

See also Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 638 F.Supp.126, 134 (D. Nev. 1986) ("A zoning regulation is not made invalid merely because of loss of valueto the property affected, even if that loss is substantial").

Under federal law, a land use regulation generally does not constitute a taking unless itdeprives the property owner of all use of the property. Lucas v. South Carolina Coastal Council, 505U.S. 1003 (1992); First English Evangelical Lutheran Church of Glendale v. County of Los Angeles,482 U.S. 304, 320 (1987); Jackson Court Condominiums, Inc. v. City of New Orleans, 874 F.2d1070, 1080-82 (5th Cir. 1989); Midnight Sessions Ltd. v. City of Philadelphia, 945 F.2d 667, 677 (3dCir. 1991); Pace Resources, 808 F.2d at 1031.

Although the Supreme Court has yet to define the meaning of the term "economically viableuse," the term appears to have nothing to do with whether a landowner realizes a profit on hisinvestment. See Agins, 447 U.S. at 262-63. In Williamson County Regional Planning Comm'n v.Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court discussed the "economically viable use"concept with reference to the defendant's evidence that, because of prior investments in the property,it would not be profitable to develop the land with the 67 dwelling units the Planning Commissionwas willing to approve. The Supreme Court refused to equate the concept of "economic feasibility"with the concept of "profitability."

The expected income from the sale of the 67 units apparently was measured againstthe cost of the 27-hole golf course and the cost of installing water and sewerconnections for a large development that would not have had to have been installed

for a development of only 67 units. . . . Thus, the evidence appears to indicate thatit would not be profitable to develop 67 units because respondent had made variousexpenditures in the expectation that the development would contain far more units;the evidence does not appear to support the proposition that, aside from those"reliance" expenditures, development of 67 units on the property would not beeconomically feasible.

Id. at 191 n.12 (emphasis added).

2. State Taking Analysis

In City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 805 (Tex. 1984), the TexasSupreme Court enunciated a test to determine whether an ordinance constitutes a "taking" under theTexas Constitution: A taking occurs if (1) the ordinance is not substantially related to the health,safety, or general welfare of the people; or (2) the ordinance is arbitrary.

Most zoning decisions are substantially related to the health, safety or general welfare, therebysatisfying the first prong of the Turtle Rock test. This rule was applied in Turtle Rock to uphold thepark land dedication ordinance in question.

The presumption favors the reasonableness and validity of the ordinance. An"extraordinary burden" rests on one attacking the city ordinance. . . . If reasonableminds may differ as to whether or not a particular zoning ordinance has a substantialrelationship to the public health, safety, morals, or general welfare . . . the ordinancemust stand as a valid exercise of the city's police power.

Turtle Rock, 680 S.W.2d at 805. Most land use decisions are at the very least issuable or debatable,and therefore should be upheld as facially and constitutionally sound. The state takings test wassubstantially expanded in Mayhew, supra, discussed infra at 8-12.

B. Due Process And Equal Protection Challenges In General

Initially, it should be noted that in order for a landowner to maintain a claim for substantivedue process, equal protection or taking without just compensation, the landowner must establish thathe has been deprived of a property interest. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-04(1984); Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1972). Property interestsare not created by the United States Constitution; rather, they are created by state law. Board ofRegents v. Roth, 408 U.S. 564, 577 (1972). It is well established in Texas that "property owners donot acquire a constitutionally protected vested right in property uses once commenced or in zoningclassifications once made." City of University Park v. Benners, 485 S.W.2d 773, 778 (Tex. 1972);Smith v. Copeland, 787 S.W.2d 420, 422 (Tex.App.-San Antonio 1990, no writ).

1. Federal Substantive Due Process Analysis

The applicable standard of review for substantive due process claims in land use matters wasestablished in Shelton v. City of College Station, 780 F.2d 475, 482 (5th Cir.) (en banc), cert. denied,477 U.S. 905 (1986) ("[W]e hold that the outside limit upon a state's exercise of its police power andzoning decisions is that they must have a rational basis"). In reviewing a landowner's challenge, theappropriate inquiry for a reviewing court is whether there was a conceivable or even hypothesizedfactual basis for the specific zoning decision made. Id. at 480-81. It is not the function of the trialcourt to determine whether a city council's land use decision necessarily would have been the bestcourse for the community. Id. at 480. The United States Supreme Court has admonished courtsfrom intruding into local government zoning decisions absent a clear showing of a violation ofconstitutional rights.

The zoning function is traditionally a governmental task requiring the "balancing [of]numerous competing considerations," and courts should properly "refrain fromreviewing the merits of [such] decisions, absent a showing of arbitrariness orirrationality."

Larkin v. Grendel's Den. Inc., 459 U.S. 116, 121 (1982) (citations omitted).

The range of legitimate governmental interests to support a change in zoning or other landuse decision is very broad. In Euclid, 272 U.S. at 394, the Supreme Court first sustained theconstitutionality of zoning ordinances based upon the "evils of overcrowding people." The Courtfurther noted the legitimacy of keeping residential areas free of "disturbing noises," "increased traffic,"the hazards of "moving and parked automobiles" and "depriving children of the privilege of quiet andopen spaces. . . ." The ordinance was upheld because the validity of the legislative classification was"fairly debatable" and therefore could not be said to be "wholly arbitrary." Id. at 388. Similarly, inBerman v. Parker, 348 U.S. 26 (1954), a landowner challenged a District of Columbia zoningordinance alleging that such ordinances were unconstitutional because they were passed "merely todevelop a better balanced, more attractive community." Id. at 31. In upholding the zoning ordinance,the Supreme Court held:

We do not sit to determine whether a particular housing project is or is not desirable.The concept of the public welfare is broad and inclusive. [Citations omitted.] Thevalues it represents are spiritual as well as physical, aesthetic as well as monetary. Itis within the power of the legislature to determine that a community should bebeautiful as well as healthy, spacious as well as clean, well-balanced as well ascarefully patrolled.

Id. at 32-33.

In reviewing the constitutionality of a zoning enactment, courts are required to recognize thepresumption of validity accorded the enactment. Goldblatt v. Hempstead, 369 U.S. 590, 596 (1962);

United States v. Carolene Products Co., 304 U.S. 144, 154 (1938) (exercise of police power will beupheld if any set of facts either known or which could be reasonably assumed affords support for it).

Zoning ordinances are presumed valid. [Citations omitted.] The courts may interfereonly if an ordinance is unreasonable and arbitrary. Hence, parties challenging anordinance bear the "extraordinary burden" of demonstrating that reasonable mindscould not differ as to whether the ordinance has a "substantial relationship to theprotection of the general health, safety or welfare of the public." Otherwise, theordinance will stand. [Citations omitted.] Thus, the Ordinance need only have apossible rational basis; the court will not inquire into its actual purposes. In otherwords, the court's review is deferential to the City.

Brewster v. City of Dallas, 703 F.Supp. 1260, 1263-64 (N.D. Tex. 1988) (emphasis in original).Indeed, as one court explains: "[Substantive due process] claims should, however, be limited to thetruly irrational--for example, a zoning board's decision made by flipping a coin. . . ." Lemke v. CassCounty, 846 F.2d 469, 472 (8th Cir. 1987) (Arnold, J., concurring).

2. Federal Equal Protection Analysis

The equal protection clause of the Fourteenth Amendment commands that no State shall"deny to any person within its jurisdiction the equal protection of the laws," which essentially is adirection that all persons similarly situated should be treated alike. Plyler v. Doe, 457 U.S. 202, 216(1982). Section 5 of the Amendment empowers Congress to enforce this mandate, but absentcontrolling congressional direction, the courts themselves have devised standards for determining thevalidity of state legislation or other official action that is challenged as denying equal protection. Thegeneral rule is that legislation is presumed to be valid and will be sustained if the classification drawnby the statute is rationally related to a legitimate state interest. Schweiker v. Wilson, 450 U.S. 221,230 (1981); United States Railroad Retirement Bd. v. Fritz, 449 U.S. 166, 174-75 (1980); Vance v.Bradley, 440 U.S. 93, 97 (1979); New Orleans v. Dukes, 427 U.S. 297, 303 (1976). When socialor economic legislation is at issue, the equal protection clause allows the states wide latitude, UnitedStates Railroad Retirement Bd., 449 U.S. at 174; Dukes, 427 U.S. at 303, and the Constitutionpresumes that even improvident decisions eventually will be rectified by the democratic process. Cityof Cleburne v. Cleburne Living Center, 473 U.S. 432, 440 (1985).

The general rule gives way, however, when a statute or ordinance classifies by race, alienageor national origin. These factors are so seldom relevant to the achievement of any legitimate stateinterest that laws grounded in such considerations are deemed to reflect prejudice and antipathy ) aview that those in the burdened class are not as worthy or deserving as others. For these reasons andbecause such discrimination is unlikely to soon be rectified by legislative means, these laws aresubjected to strict scrutiny and will be sustained only if they are suitably tailored to serve a compellingstate interest. See Cleburne Living Center, 473 U.S. at 441, and the cases cited therein.

Strict scrutiny has never been employed in reviewing deferential treatment based upon wealthclassifications. See, e.g., James v. Valtierra, 402 U.S. 137 (1971); Harris v. McRae, 448 U.S. 297,323 (1980) (poverty, standing alone, is not a suspect classification); San Antonio Indep. Sch. Dist.v. Rodriguez, 411 U.S. 1, 29 (1973) (Supreme Court has never held that financial need aloneidentifies a suspect class for purposes of equal protection analysis). See also Maher v. Roe, 432 U.S.464, 470-71 (1977). An ordinance or other legislative enactment that does not burden a suspect classor a fundamental interest should not be overturned "unless the varying treatment of different groupsor persons is so unrelated to the achievement of any combination of legitimate purposes that we canonly conclude that the [governing body's] actions were irrational." Pennell v. City of San Jose, 485U.S. 1, 14 (1988) (quoting Vance, 440 U.S. at 97).

3. State Substantive Due Process And Equal Protection Analysis

In Texas, municipal zoning ordinances and other land use legislation are presumed to be validand the burden is on the party seeking to prevent their enforcement, whether generally or in relationto a specific parcel of property, to prove that the ordinance or other legislative act is arbitrary orunreasonable because it bears no substantial relationship to the health, safety, morals or generalwelfare of the citizenry. If reasonable minds may differ, no clear abuse of discretion is shown and theordinance must stand as a valid exercise of the city's police power. City of Pharr v. Tippitt, 616S.W.2d 173, 175-76 (Tex. 1981); Hunt v. City of San Antonio, 472 S.W.2d 536, 539 (Tex. 1971).The burden on the party attacking the ordinance or other legislative act is an "extraordinary" one andthe challenging party must show that no conclusive or controversial, issuable facts or conditions existthat would authorize the governing body of the municipality to exercise the discretion confided to it.Hunt, 472 S.W.2d at 539; Thompson v. City of Palestine, 510 S.W.2d 579, 581 (Tex. 1974). Thevalidity of an ordinance or other legislative act clearly is a question of law, not a question of fact.City of Pharr, 616 S.W.2d at 175; Hunt, 472 S.W.2d at 539.

In determining whether an ordinance or other legislative act violates either the due processof law or equal protection of law provisions of the Texas Constitution (see Tex.Const. art. I, § 3),a reviewing court must determine whether to apply the rational relationship or strict scrutiny test.See, e.g., Littlefield v. Hays, 609 S.W.2d 627, 629 (Tex.Civ.App.-Amarillo 1980, no writ). Inundertaking due process and equal protection analyses, the reviewing court must deem the stateconstitutional provisions coterminous with their federal counterparts; consequently, federalconstitutional due process and equal protection violations are equated with the appropriate stateconstitutional violations. See, e.g., Alford v. City of Dallas, 738 S.W.2d 312, 315-28(Tex.App.-Dallas 1987, no writ) (federal and state constitutional due process and equal protectionclaims simultaneously considered along with applicable case law and are dispositive of both federaland state constitutional claims); Lubbock Poster Co. v. City of Lubbock, 569 S.W.2d 935, 944(Tex.Civ.App.-Amarillo 1978, writ ref'd n.r.e.), cert. denied, 444 U.S. 833 (1979); HoustonChronicle Publishing Co. v. City of Houston, 620 S.W.2d 833, 836-39 (Tex.Civ.App.-Houston [14thDist.] 1981, no writ).

C. Procedural Due Process Challenges In General

"It is an established constitutional principle that procedural due process attaches only toadministrative or adjudicatory action by the state, and not to legislative action." Development in theLaw - Zoning, 91 Harv. L. Rev. 1427, 1508 (1978) (emphasis added). See also Bi-Metallic Inv. Co.v. State Bd. of Equalization, 239 U.S. 441 (1915); Joint Anti-Fascist Refugee Comm. v. McGrath,341 U.S. 123, 167 (1951) ("[W]hen decisions of administrative officials in execution of legislationturn exclusively on considerations similar to those on which the legislative body could itself haveacted summarily, notice and hearing may not be commanded by the Constitution"). Consequently,the procedural protections of due process do not extend to all deprivations of otherwise protectedproperty interests. Deprivations which occur as a result of a legislative act of a municipality are notsubject to the procedural requirements of due process. See Jackson Court Condominiums, supra, andcases cited therein; Couf v. DeBlaker, 652 F.2d 585, 590 (5th Cir. 1981), cert. denied, 455 U.S. 921(1982) ("Our opinions repeatedly characterize local zoning decisions as `legislative' in nature,"therefore "Plaintiffs cannot complain of a denial of procedural due process, for no constitutionallimitation on legislative procedure is relevant here").

As noted by the Fifth Circuit in Calhoun v. St. Bernard Parish, 937 F.2d 172 (5th Cir. 1991),even spot zoning is considered a legislative act:

Although this court has always viewed zoning as a legislative function, at onepoint, we distinguished "true" zoning ordinances from spot zoning. . . .

In Shelton [supra], this circuit put [that distinction] to rest. In Shelton, weheld the denial of a request for a variance from a zoning ordinance was a legislativedecision. . . . It followed that the decision at issue was a legislative judgment, anevaluation of legislative facts, even though the legislative decision was not the initialenactment of a zoning code. Rather, the spot zoning remained legislative in character.

Id. at 174.

III.

OVERVIEW OF REGULATORY TAKINGS CLAIMS UNDER MAYHEW

While the above-referenced discussions give a broad overview of the possible avenues ofattack against the zoning and land use decisions under both the Texas and Federal Constitution, theTexas Supreme Court's recent decision in Mayhew v. Town of Sunnyvale, 964 S.W.2d 922 (Tex.1998), is worthy of a closer look, given that it is the Court's latest and most exhaustive discussion ofthese constitutional concepts and because Mayhew has added a new wrinkle to the law in terms of"investment-backed expectations.".

1 In Mayhew, the Court assumed, without deciding, that the state and federal guarantees inrespect to land use constitutional claims were coextensive, and the Court analyzed all of theMayhew plaintiffs' claims under federal standards. In that case, however, the plaintiffs assertedboth state and federal claims and all parties to that litigation agreed that the federal analysis wasappropriate to resolve the state constitutional claims. Id. at 932.

The Texas Supreme Court in Mayhew, relying extensively on federal cases with respect toland-use constitutional claims,1 recently provided us with a road map in the manner in which toanalyze regulatory takings claims.

In a general rule, the application of a general zoning law to a particular propertyconstitutes a regulatory taking if the ordinance "does not substantially advancelegitimate state interests" or it denies an owner "all economically viable use of hisland."

Id., 964 S.W.2d at 933.

Mayhew indicated that in any taking analysis, the initial inquiry is whether the challengedgovernmental action substantially advances a legitimate public interest. The second step in the takinganalysis examines whether the challenged governmental action denied the property owner alleconomically viable use of its land. Id.

A. Substantially Advances A Legitimate Interest

The legitimacy prong of a regulatory takings analysis requires a court to identify whether thechallenged regulation substantially advances a legitimate governmental interest. The Mayhew Courtindicated that "a broad range of governmental purposes and regulations" will pass this constitutionalmuster given the variety of legitimate state interests available to governmental entities, includingprotecting residents from the "ill-effects of urbanization," "enhancing the quality of life," "precludingthe conversion of open-space land to urban uses," "preserving desirable aesthetic features," and"controlling both the rate and character of community growth." Id. at 934.

The range of legitimate governmental interests to support a change in zoning or other landuse decision is very broad. In Village of Euclid, 272 U.S. at 365, the Supreme Court first sustainedthe constitutionality of zoning ordinances based upon the "evils of overcrowding people." The Courtfurther noted the legitimacy of keeping residential areas free of "disturbing noises," "increased traffic,"the hazards of "moving and parked automobiles" and "depriving children of the privilege of quiet andopen spaces. . . ." The ordinance was upheld because the validity of the legislative classification was"fairly debatable" and therefore could not be said to be "wholly arbitrary." Id. at 388. Similarly, inBerman v. Parker, 348 U.S. 26 (1954), a landowner challenged a District of Columbia zoningordinance alleging that such ordinances were unconstitutional because they were passed "merely todevelop a better balanced, more attractive community." Id. at 31. In upholding the zoning ordinance,the Supreme Court held:

We do not sit to determine whether a particular housing project is or is not desirable.The concept of the public welfare is broad and inclusive. [Citations omitted.] Thevalues it represents are spiritual as well as physical, aesthetic as well as monetary. Itis within the power of the legislature to determine that a community should bebeautiful as well as healthy, spacious as well as clean, well-balanced as well ascarefully patrolled.

Id. at 32-33.

B. Just Compensation Takings Claims

The Mayhew Court, in reviewing the just compensation prong of the regulatory takingsanalysis, held that even if a governmental action substantially advances a legitimate state interest, that"[a] compensable regulatory taking can also occur when governmental agencies impose restrictionsthat either (1) deny landowners of all economically viable use of their property, or (2) unreasonablyinterfere with landowners' rights to use and enjoy their property." Id. at 935. In determining whethera restriction denies a landowner of all economically viable use of the property, a court must determinewhether the restriction renders the property valueless or, in other words, whether any value remainsin the property after the governmental action. Id.

To determine whether the government has unreasonably interfered with the landowner's rightsto use and enjoy property, the Court noted the importance of two factors: "the economic impact ofthe regulation and the extent to which the regulation interferes with distinct investment-backedexpectations." Id. In analyzing the first factor, the economic impact of the regulation, the Courtindicated that it was appropriate to compare "the value that has been taken from the property withthe value that remains in the property." Id. The Court admonished, however, that "[t]he loss ofanticipated gains or potential future profits is not usually considered in analyzing this factor." Id. at936.. The Mayhew Court's analysis is consistent with federal law in this area. See Part II(A)(1),supra.

C. Investment-Backed Expectations

In reviewing the second factor of the economic impact test -- the extent to which theregulation interferes with distinct investment-backed expectations -- the Mayhew Court provided uswith little guidance as to the meaning or application of that standard. A review of the cases cited inMayhew, however, provides some clarity as to the meaning of the investment-backed expectationstest.

The Supreme Court in Lucas, supra, while not defining "distinct investment-backedexpectations," made it very clear that such expectations are shaped by the uses permitted by state lawand the reasonable regulations that government may place upon the use of the property. The Courtreveal the importance of understanding "how the owner's reasonable expectations have been shapedby the State's law of property -- i.e., whether and to what degree the State's law has accorded legal

recognition and protection to the particular interest in land with respect to which the takings claimantalleges a diminution in (or elimination of) value." Id., 505 U.S. at 1016 n.7. In fact, the Courtacknowledged that the property owners' expectations regarding the use of their property shouldreasonably include the government's power to restrict property uses.

[O]ur "taking" jurisprudence . . . has traditionally been guided by the understandingsof our citizens regarding the content of, and the State's power over, the "bundle ofrights" that they acquire when they obtain title to property. It seems to us that theproperty owner necessarily expects the uses of his property to be restricted, from timeto time, by various measures newly enacted by the State in legitimate exercise of itspolice powers; "[a]s long recognized, some values are enjoyed under an impliedlimitation and must yield to the police power."

Id. at 1027 (quoting Pennsylvania Co. v. Mahon, 260 U.S. 393, 413 (1922)).

Justice Kennedy, in his concurring opinion, further explain the meaning of an "owner'sreasonable, investment-backed expectations." Lucas, 505 U.S. at 1034. Justice Kennedy explainedthat reasonable, investment-backed expectations must be determined in light of the rights affordedthe property owner by state law.

Property is bought and sold, investments are made, subject to the State'spower to regulate. Where a taking is alleged from regulations which deprive theproperty of all value, the test must be whether the deprivation is contrary toreasonable, investment-backed expectations.

There is an inherent tendency towards circularity in this synthesis, of course;for if the owner's reasonable expectations are shaped by what courts allow as a properexercise of governmental authority, property tends to become what courts say it is.Some circularity must be tolerated in these matters, however, as it is in other spheres.The definition, moreover, is not circular in its entirety. The expectations protectedby the Constitution are based on objective rules and customs that can be understoodas reasonable by all parties involved.

In my view, reasonable expectations must be understood in light of the wholeof our legal tradition.

Id. at 1034-35 (citations omitted).

Consequently, in order to determine whether the a zoning decision would violate alandowner's reasonable distinct, investment-backed expectations, a court must look to the law inTexas regarding whether a landowner acquires any vested rights in the zoning on his property or theright to immediately put the property to a desired use. A review of Texas law establishes that no suchrights or reasonable, investment-backed expectations, should exist. It is important to remember that

2 See, e.g., Andrus v. Allard, 444 U.S. 51, 66 (1979) (loss of anticipated gains or future profitsis not usually sufficient to constitute a taking); Agins, 447 U.S. at 263 n.9 (fluctuations in valueduring the process of governmental decisionmaking, absent extraordinary delay, are incidents ofownership and cannot be considered a taking); Park Ave. Tower Assoc. v. City of New York,746 F.2d 135, 139 (2nd Cir. 1984), cert. denied, 470 U.S. 1087 (1985) (loss of profit orreasonable return on investment does not constitute a taking).

in Texas, all property is held subject to the valid exercise of the police power and compensation isgenerally not required for losses resulting therefrom. Turtle Rock, 680 S.W.2d at 804. A propertyowner acquires no property interest in an existing zoning classification, or even in uses oncecommenced. City of University Park v. Benners, 485 S.W.2d 773, 778 (Tex. 1972); See City ofPharr v. Pena, 853 S.W.2d 56 (Tex.App.-Corpus Christi 1993, writ denied). A particular zoningclassification does not become vested even by preparation and preliminary work done in anticipationof development. Caruthers v. Board of Adjustment, 290 S.W.2d 340, 350-51 (Tex.Civ.App.-Galveston 1956). See also Town of Sunnyvale v. Mayhew, 905 S.W.2d 234, 262 (Tex.App.-Dallas1994) aff'd, 964 S.W.2d 922 (1998) (despite town’s encouragement to apply for zoning approval anddevelopers’ expenditure of over $500,000 in the application process, developers had no right to havetheir property rezoned); Biddle v. Board of Adjustment, 316 S.W.2d 437, 441 (Tex.Civ.App.-Houston 1958, writ ref'd n.r.e.); Benners, 485 S.W.2d at 778. Indeed, a city may rezone propertyeven if an application for development approval is pending. Williamson Pointe Venture v. City ofAustin, 912 S.W.2d 340, 343 (Tex.App.-Austin 1995, no writ) (holding that Vested Rights Statutedid not prohibit city from amending zoning); Connor v. City of University Park, 142 S.W.2d 706, 709(Tex.Civ.App.-Dallas 1940, writ ref'd).

As is discussed in detail in Part IV of this paper, however, the investment-backed expectationstest is far from clear in its scope or its application.

D. Profit Expectations Are Noncompensable

Further, a landowner's expectations regarding the profits that he might make from his propertyare similarly not entitled to constitutional protection. In reviewing whether a particular zoningdecision created a "severe economic impact" on a property owner, the Texas Supreme Court in Taubv. City of Deer Park, 882 S.W.2d 824, 826 (Tex. 1993), stated as follows:

The testimony [the landowner] offered at trial was simply that the land could not beprofitably developed when zoned for single-family use. The takings clause, however,does not charge the government with guaranteeing the profitability of every piece ofland subject to its authority. Purchasing and developing real estate carries with itcertain financial risks, and it is not the government's duty to underwrite this risk as anextension of obligations under the takings clause. (emphasis in original).

This is consistent with federal precedence in this regard.2

IV.

INVESTMENT BACKED EXPECTATIONS

There is no precise legal definition of the term “distinct investment-backed expectations”utilized by the Texas Supreme Court in Mayhew . Reasonable or distinct investment-backedexpectations, is a factor in the economic impact or just compensation prong of a regulatory takingsanalysis.

The just compensation prong of the takings analysis dictates that a zoning regulation does notamount to a taking if the regulation does not deny a plaintiff of all economically viable use of theproperty. This analysis is an ad hoc inquiry based on the peculiar facts of each case. The MayhewCourt further asks whether the regulation unreasonably interferes with a plaintiff’s right to use andenjoy property. Unreasonable interference appears to be determined by evaluating (1) the economicimpact of the regulation, and (2) the extent to which the regulation interferes with distinct investment-backed expectations. Bowen v. Gilliard, 483 U.S. 587, 606 (1986); Hodel v. Irving, 481 U.S. 704,713-14 (1986); Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 516 (1986);MacDonald, Sommer & Frates v. County of Yolo, 477 U.S. 340, 348-49 (1986); Loretto v.Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426 (1981); Penn Central Transp. Co. v. Cityof New York, 438 U.S. 104, 124 (1978).

While the Mayhew Court was not precise in its use of reasonable or distinct investment-backed expectations, the Supreme Court described the term in Lucas, 505 U.S. 1003 (1992).Investment-backed expectations are clearly shaped by the uses permitted by state law and the abilityof the state to impose restrictions on the use of the property. Id. at 1006 n.7. An analysis ofinvestment-backed expectations revolves around (1) whether the plaintiff’s expectations concerningthe use of the property are objectively reasonable in light of state property and land use law; and (2)whether the zoning regulation unreasonably interferes with those expectations. Thus, the key inquirybecomes whether or not the plaintiff can demonstrate an objectively reasonable expectation ofproperty use based on the contours of state land use and property law. Id. at 1034-35 (Kennedy, J.concurring).

The economic impact of a zoning regulation and the frustration of reasonable investment-backed expectations, however, while relevant in determining whether a taking has occurred, are notdispositive. Furey v. City of Sacramento, 592 F. Supp. 463 (E.D. Cal. 1984), affirmed 780 F.2d 1448(9th Cir. 1986). Rather, the ultimate question is whether it is consistent with justice and fairness toforce a landowner to bear the burdens occasioned by a change in land use regulation. This requiresa weighing of public and private interests implicated by both the regulation and the finding of a taking.Id. An ordinance which merely deprives the landowner of the highest and best use of his propertyor causes diminution of its market value does not constitute an unlawful taking. Jackson v. CityCouncil of City of Charlottesville, Virginia, 659 F. Supp. 470 (W.D. Va. 1987), affirmed in part,vacated in part, 840 F.2d 10 (4th Cir. 1988).

A. The Genesis of Investment-Backed Expectations -Penn Central

While “reasonable investment-backed expectation” lacks a clear definition in Texas propertylaw, federal decisions have attempted to develop a working definition of the concept. The SupremeCourt first coined the phrase in Penn Central, 438 U.S. at 124-25 (1978). The Court found that therailroad’s belief that it could use the airspace above Grand Central Station for building additionaloffice space was not a sufficient expectation for takings purposes for three separate reasons.

First, “‘[t]aking’ jurisprudence does not divide a single parcel into discrete segments andattempt to determine whether rights in a particular segment have been entirely abrogated.” Id. at 130.This holding countered the assertion of the property owner that the city’s refusal to allow PennCentral to use the airspace above Grand Central Station took their property rights. This “wholeproperty” rule means that courts need not give Takings Clause protection to every strand of anowner’s property rights.

Second, the plaintiff failed to establish an investment-backed expectation because the ownercould still further develop the property even considering the city’s restrictions on the use of theproperty. “[T]he submission that [Penn Central] can establish a ‘taking’ simply by showing that theyhave been denied the ability to exploit a property interest they heretofore had believed was availablefor development is quite simply untenable.” Id. The “exploitation” holding limits landowner relianceon investment-backed expectations because a subjective intention concerning property is not enoughto support a takings claim.

Finally, the designation of Grand Central Station as a historic landmark did not interfere withthe “primary expectation concerning the use of the parcel” as a railway terminal. Id. at 136. Forexample, a landowner’s primary expectations concerning the use of property might be to develop asubdivision of single-family residences. Limiting the density of the development should not frustratethe primary expectation of the developer since the property can still be developed, just not at thedensity the landowner would optimally desire.

A major problem in the various decisions concerning investment-backed expectations has beenthe choice of terms used to describe the concept. For instance, in Lucas, Justice Scalia pointed outthat the Court had not clearly defined the property interest to which courts should apply the “denialof all economically viable use” rule. Adding that “[t]he answer to this difficult question may lie inhow the owner’s reasonable expectations have been shaped by the State’s law of property–i.e.,whether and to what degree the State’s law has accorded legal recognition and protection to theparticular interest in land with respect to which the takings claimant alleged a diminution in (orelimination of) value.” Id., 505 U.S. at 1016.

B. Frustration of Reasonable Investment-Backed Expectations

The Supreme Court has addressed the circularity of investment-backed expectations byprotecting only expectations frustrated by abrupt and arbitrary changes in government regulation.

Kirby Forest Industrs, Inc. v. United States, 467 U.S. 1 (1984). For example, courts usually hold thata downzoning of part of a community to a less intensive use to implement the policies of acomprehensive plan is neither abrupt not arbitrary. Norbeck Village Joint Venture v. MontgomeryCity Council, 254 A.2d 700 (Md. 1969). Courts may hold that downzoning a single tract of land inresponse to community protest is arbitrary. Udell v. Haas, 235 N.E.2d 897 (N.Y. 1968). Thisapproach accepts the argument that landowners should anticipate that zoning regulations whichimpact their property are subject to change. In essence, regulatory uncertainty shapes the validity oflandowner expectations, and judicial protection of expectations should diminish as regulatoryuncertainty increases (i.e., regulatory risk shapes a court’s protection of landowner expectations).

For example, the Third Circuit applied a risk-based analysis of investment-backed expectationsin Pace Resources, supra. After the plaintiff began development of an industrial park, the townshipblocked its completion, in part by downzoning, when residents became concerned about industrialdevelopment. The plaintiff successfully challenged the downzoning in state court and then sued infederal court claiming a taking because the town denied it the economically viable use of its landduring the period up to the state court decision. The Third Circuit held that the downzoning was nota taking. The court applied Penn Central’s investment-backed expectations definition. The courtheld that a regulation frustrates owner expectations only when the regulation has nearly the sameeffect as the complete destruction of rights the party has in the land. Id., 808 F.2d at 1032 (quotingPenn Central Transp. Co. v. City of New York, 438 U.S. 104, 127 (1978)).

This holding has been further interpreted to mean that a landowner’s investment-backedexpectations are not frustrated unless the plaintiff is denied all economically viable use of its land.Midnight Sessions, 945 F.2d at 667; Elsmere Park Club, Ltd v. Town of Elsmere, 771 F. Supp. 646(D. Del. 1991); Offen v. County Council for Prince George’s County, 625 A.2d 424 (Md. Ct. Spec.App. 1993), rev’d and remanded on other grounds, 639 A.2d 1070 (Md. 1994). Other courts havearrived at the same holding. See Martin v. United States, 30 Fed. Cl. 542 (1994); O’Connor v.Corps of Eng’rs, United States Army, 801 F. Supp. 185 (N.D. Ind. 1992); Fitzgarrald v. City of IowaCity, 492 N.W.2d 659 (Iowa 1992), cert. denied, 113 S. Ct. 2343 (1993); Moroney v. Mayor & CityCouncil of Old Tappan, 633 A.2d 1045 (N.J. Super. Ct. App. Div. 1993), cert. denied, 642 A.2d1004 (N.J. 1994).

C. “Reasonable” Investment-backed Expectations

In reviewing various jurisdictions’ approaches to defining “investment-backed expectations,”we can extrapolate several factors to determine whether a property owner’s expectations concerningthe use of his property are reasonable. While none of these factors appear to be dispositive in andof themselves, they are factors that various courts have discussed in attempting to give meaning tothe term “reasonable investment-backed expectations.”

1. The severity and extensiveness of the regulations at the time the property waspurchased.

In Palm Beach Isles Assocs. v. United States, the landowners alleged that the Army Corpsof Engineer’s denial of a dredge and fill permit amounted to a regulatory taking of 50.7 acres ofsubmerged land. 42 Fed. Cl. 340 (Ct. Cl. 1998). The Corps of Engineer’s response to the previouslandowner’s application for a fill permit outlined the basis for denial some thirty-two years before thecurrent landowners applied for a fill permit.. Apparently, the property supported a healthy andproductive example of the marine estuary ecosystem. The Corps also determined that allowing theproperty to be filled in would result in a degradation of water quality in the area. Id. at 342-48. Theclaims court found that the property was subject to the exclusive regulation by the United Statesunder the Rivers and Harbors Act of 1899 because the water above the land was “navigable.” Id.The court held that since navigable water had remained under the exclusive control of the UnitedStates, the property owners had no reasonable expectation that they would be issued a permit to fillin the property. “Land or property within the bed are always subject to (or burdened with) thepotential use of the navigational servitude; thus, no compensation is owed when the government takessuch land as a result of aiding the navigation of the stream.” Id. at 353 (quoting Owen v. UnitedStates, 851 F.2d 1404, 1409).

Consideration of the first factor weighed heavily in Deltona Corp. v. United States, 657 F.2d1184 (Ct. Cl. 1981), cert. denied, 455 U.S. 1017 (1982). There, the plaintiff developer claimed thatit suffered a taking as a result of federal regulations that effected one of its planned subdivisions. Thedeveloper had purchased five areas which it planned to develop sequentially into a watersidecommunity. The plaintiff obtained dredge permits for the first and second areas, however, the ArmyCorps of Engineers denied the permit request for the third area. The court of claims held thatalthough “Deltona is no longer able to capitalize upon a reasonable investment-backed interest, whichit had every justification to rely upon until the law began to change,” the frustration of the propertyowner’s expectations “neither ‘extinguishes a fundamental attribute of ownership’ nor preventsDeltona from deriving many other economically viable uses from its parcel–however delineated.” Id.at 1191.

Other cases are in accord. See also Silverman v. Barry, 727 F.2d 1121 (D.C. Cir. 1984);Sadowsky v. City of New York, 732 F.2d 312, 318 (2d Cir. 1984); Traweek v. City and County ofSan Francisco, 659 F. Supp. 1012, 1026 (N.D. Cal. 1984) (“plaintiffs bought into a heavily regulatedsituation . . .”), affirmed in part, vacated in part 920 F.2d 589 (9th Cir. 1990); Graham v. EstuaryProperties, Inc., 399 So. 2d 1374, 1383 (Fla. 1981); Parkway Bank & Trust Co. v. County of Lake,389 N.E.2d 882 (1979); Howard v. State, 647 P.2d 828 (1982); County of Ada v. Henry, 668 P.2d994 (1983); Claridge v. New Hampshire Wetlands Bd., 485 A.2d 287 (1984); Orion Corp. v.Washington, 747 P.2d 1062, 1073 (1987).

2. The past regulatory history of the specific property.

See Habersham at Northridge v. Fulton County, 632 F. Supp. 815, 823 (N.D. Ga. 1985)(buying property which the county had already twice refused to rezone did “not evidence a reasonableinvestment-backed expectation but, rather, a business gamble”); 900 G St. Assocs. v. Department ofHous. & Commercial Dev., 430 A.2d 1387, 1390 (D.C. 1981); Kempf v. City of Iowa City, 402

N.W.2d 393 (Iowa 1987); Levy v. City of Cherry Hills Village, 666 F. Supp. 201, 203 (D. Colo.1987).

3. The degree of impairment of the uses of the property.

This third factor was significant in Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84 (2d Cir.1992), cert. denied sub nom. Southview Assocs., Ltd. v. Individual Members of Vermont Envtl. Bd.,113 S. Ct. 1586 (1983). A developer sued members of the Vermont Environmental Review Boardclaiming that a denial of a permit to develop a residential subdivision constituted a taking. Applyingthe investment-backed expectations factor, the Second Circuit concluded that the developer’sexpectations were not reasonable, rather they were optimal. The court observed that the Board’sdecision left intact the plaintiff’s ability to use the property (1) for farming, logging, or forestry; (2)to construct residential or commercial improvements that would garner Board approval; (3) toconstruct and sell a number of homes, just not as many as the plaintiff had planned; and (4) to makerecreational use of the land. Id. at 94. The Second Circuit approach balances all the property rightsof the plaintiff against those property rights regulated by the government.

In Jentgen v. United States, the claims court concluded that even though the landowner wasable to develop only fifty percent of his property as a consequence of a change in federal regulations,this fact “merely present[ed] an instance of some diminution in value.” 657 F.2d 1210 (Ct. Cl. 1981),cert. denied, 480 U.S. 951 (1987). The Supreme Court has long held that diminution in value,considered alone, cannot establish a taking. Penn Central, 438 U.S. at 131(1978) (finding that courts“uniformly reject the proposition that diminution in property value, standing alone, can establish a“taking”); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922) (holding that one of thefactors in deciding whether a taking has occurred is the degree in which values incident to theproperty are diminished by the regulation in question). Courts are generally hesitant to find that thepurchase price of land qualifies as a distinct investment-backed expectation, which would allow anowner to claim a taking based on downzoning of the property after purchase resulting in a loweredproperty value. New Port Largo v. Monroe County, 95 F.3d 1084 (11th Cir. 1996) (holding that thepurchase price does not create a property right immunizing the landowner from future land usechanges).

As an example, consider the “battle for Russian Hill” in Haas & Company v. City of SanFrancisco. 605 F.2d 1117 (9th Cir. 1979). Haas & Company, a developer, obtained land in aprestigious section of historic San Francisco, Russian Hill. The developer proposed to erect twoapartment buildings, one of twenty-five stories, the other of thirty-one. The area was zoned to allowhigh-rise buildings and sat amongst low-rise buildings. Neighbors of the proposed developmentsparked a zoning battle in which the site was eventually down-zoned to a forty-foot height limit.Haas & Company purchased the property for $1.6 million. Zoned for high-rise buildings, theproperty was valued at $2.0 million. Zoned for low-rise buildings, the property was valued at$100,000. These disappointed expectations based on what was paid as the purchase price did notcreate a taking. Haas, 605 F.2d at 1121. As the Lucas court stated, one buys property with theunderstanding that it is subject to the police power of the state and “necessarily expects the use of

his property to be restricted, from time to time, by various newly enacted measures.” Lucas, 505U.S. at 1027. See also Deltona Corp., 657 F.2d at 1192; Shanghai Power Co. v. United States, 4 Cl.Ct. 237, 242 (1983), aff'd, 765 F.2d 159 (Fed Cir. 1985); United Nuclear Corp. v. United States, 12Cl. Ct. 45, 55 (1987); Kasparek v. Johnson County Bd. of Health, 288 N.W.2d 511, 518 (Iowa1980).

4. The value of uses available before enactment of the challenged regulation.

In Price v. City of Junction, the Fifth Circuit upheld the constitutionality of a city’s “junk car”ordinance. 711 F.2d 582 (5th Cir. 1983). The Fifth Circuit found that “[b]y their very nature suchinoperable junk vehicles do not embody reasonable, investment-backed expectations.” Id. at 591.The cases focusing on this factor indicate that courts will not consider expectations with little or novalue. See also Orion Corp. v. Washington, 747 P.2d 1062, 1082 (1987)

5. The novelty or unexpectedness of the government’s action.

See Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 14 (1984); Deltona Corp., 657F.2d at 1192; Shanghai Power Co., 4 Cl. Ct. at 242; Elias v. Town of Brookhaven, 783 F. Supp. 758(E.D.N.Y. 1992); Nello L. Terr Co. v. Orange County, 810 F. Supp. 679, 688 (M.D.N.C. 1992);Tirolerland, Inc. v. Lake Placid 1980 Olympic Games, Inc., 592 F. Supp. 304 (N.D.N.Y. 1984); RussBldg. Partnership v. City and County of San Francisco, 750 P.2d 324 (Cal. 1988). But see Nemmersv. City of Dubuque, 716 F.2d 1194, 1200 (8th Cir. 1983); Kasparek v. Johnson County Bd. ofHealth, 288 N.W.2d 511, 518 (Iowa 1980).

6. Whether specifically (and traditionally) recognizable “sticks” were removedfrom the owner’s bundle of property rights.

A court should not find a taking where only a single strand in the bundle of property rightsis affected so long as there are enough other strands to make up for the loss, reasoning that thelandowner’s primary investment-backed expectations have not been lost. Penn Central Transp. Co.v. City of New York, 438 U.S.104, 124 (1978). See also Hall v. City of Santa Barbara, 833 F.2d1270, 1276 (9th Cir. 1986); Gregory v. City of San Juan Capistrano, 191 Cal. Rptr. 47, 58 (1983);Hornstein v. Barry, 530 A.2d 1177 (D.C. App. 1987).

7. Whether any rights (like transferable development rights) were substituted forthose impaired.

See Deltona Corp., 657 F.2d at 1192; Shanghai Power Co., 4 Ct. Cl. at 242.

8. Whether existing uses were permitted to continue.

See MacLeod v. County of Santa Clara, 749 F.2d 541, 547 (9th Cir. 1984).

9. Whether government representations were formal or informal.

This factor inquires as to whether the claimant parted with a property right of economic valuein reliance on an expectation that the government would not act in a particular manner. Theforeseeability of the government’s action negates a takings claim under this factor.

For instance, the Supreme Court found that Monsanto had a reasonable investment-backedexpectation in some, but not all, of its trade secret data related to a chemical compound inRuckelshaus v. Monsanto Company, 467 U.S. 986 (1984). Monsanto attempted to register apesticide under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). FIFRA requireddisclosure of secret data by the corporation attempting to register its chemical. However, in an earlierversion, FIFRA protected trade secrets. Monsanto alleged that required disclosure of its trade secretsamounted to a taking. The Court held that data disclosure under the newer version of FIFRA wasforeseeable, and therefore the company’s expectation of secrecy was not a “reasonable” investment-backed expectation. Id. at 1009-10. The Court wrote that in order to be reasonable, the expectationmust be more than a “unilateral expectation or an abstract need.” Id. at 1005-06 (quoting Webb’sFabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 151, 161 (1980)). The reasonableness ofMonsanto’s expectations was defined by the statutory law in effect at the time the company submittedits data to the Environmental Protection Agency (EPA). Id. at 1006. The EPA’s disclosure of secretdata submitted prior to the amendments to FIFRA triggered the takings protection for only the datasubmitted prior to the amendment. Monsanto’s data submitted after the amendment was leftunprotected under the new FIFRA. Id. at 1010-15.

In another Supreme Court decision, an employer challenged the constitutionality of theMultiemployer Pension Plan Amendments Act (MPPAA), which required an employer withdrawingfrom a multiemployer pension plan to pay to the plan the employer’s proportionate share of the plan’s“unfunded vested benefits.” Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 217 (1986).A unanimous Court held that employers “had more than sufficient notice” that pension plans werenot only being regulated, “but also that withdrawal itself might trigger additional financialobligations.” Id. at 227. Justice White stated that “[t]hose who do business in a regulated fieldcannot object if the legislative scheme is buttressed by subsequent amendments to achieve thelegislative end.” Id. at 227 (quoting F.H.A. v. The Darlington, Inc., 358 U.S. 84, 91 (1958), reh’gdenied, 358 U.S. 937 (1959)). Under this reasoning, participants in a field that is highly regulated,such as land-use, will be considered to be on notice that later changes, which may be economicallydetrimental to the landowner but serve the legislative ends of the original legislation, will likely beheld constitutional. Foreseeability, thus becomes the key inquiry; if an action was foreseeable, thereis no taking.

Extending Connolly’s “foreseeability” reasoning is Parkridge Investors, Ltd. Partnership v.Farmers Home Administration, 13 F.3d 1192 (8th Cir.), cert. denied, 114 S. Ct. 2163 (1994).Parkridge Investors involved a plaintiff who owned an apartment complex financed by the FarmersHome Administration (FmHA) under the Rural Rental Housing Program. In order to obtainfinancing, rural apartment owners were required to provide affordable low-income housing. In 1985,

Parkridge Investors Limited Partnership purchased an apartment complex financed by FmHA. Thefinancing agreement provided that Parkridge could prepay the outstanding payments of the mortgageat any time. In 1987, however, Congress passed the Emergency Low Income Housing PreservationAct of 1987. The Act placed strict conditions and limitations on mortgage prepayment (e.g., waitingperiods, a sale requirement) in order to preserve low-income housing facilities. When Parkridge wasprecluded from exercising its prepayment option, it brought suit seeking to declare the PreservationAct as an unconstitutional taking. The Eight Circuit, taking into account the owner’s reasonableinvestment-backed expectations, concluded that the governmental action was foreseeable. Id. at1199. The Court examined the policy basis of the FmHA loan program and the Preservation Act,which was to prevent the decline of senior citizen and low-income housing through prepayment. Id.Because this type of action was foreseeable, Parkridge’s investment-backed expectations were notreasonable, and therefore the takings claim failed.

In yet another case that focused on the foreseeability of the governmental action, a group oflandowners seeking to fill in wetlands on their property in New Jersey sued the Army Corps ofEngineers claiming that the denial of a fill permit amounted to a taking. Ciampitti v. United States,22 Cl. Ct. 310, 311 (1991). The claims court noted that Ciampitti had been put on notice that hemight not be able to obtain the necessary fill permits by reports from his own engineering firm andfrom federal government officials before he purchased the tract of land. Id. at 321. The opinionrelied heavily on the fact that Ciampitti had notice of governmental regulation of his property andtherefore his distinct investment-backed expectations were not reasonable. Id.

Finally, in Bowles v. United States, the court of claims focused, in dicta, on the question ofnotice in determining whether Bowles’s expectations were reasonable. 31 Fed. Cl. 37, 50-51 (Cl. Ct.1994). The Army Corps of Engineers refused to grant a fill permit to a landowner in BrazoriaCounty, Texas. The Corps required a fill permit for the installation of a septic tank for a single-familyhome. Bowles contended that since the lot was so small, the only possible use for the lot was asingle-family dwelling. Denying the permit, Bowles argued, basically robbed him of all economicallyviable use of the lot. Id. at 40. The court found a taking, holding that a denial of the permit madethe property worthless. Id. In examining the reasonableness of Bowles’s expectation, the courtpointed out that other landowners in the area had never obtained fill permits to install septic systems,and that Bowles, even though he had experience working with regulatory agencies in the area, hadno knowledge of the permit requirement. These facts supported the court’s finding that Bowles’sexpectations were reasonable. Id. at 51. The implication is that if Bowles had been aware of theCorps’s jurisdiction over permitting septic systems, Bowles would have had notice of the Corps’sability to regulate Bowles’s property. Therefore the extent of Bowles’s reasonable expectationswould have been affected by his awareness of the Corps’s regulatory jurisdiction. Id.See also Oceanic Cal., Inc. v. City of San Jose, 497 F. Supp. 962, 974 (N.D. Cal. 1980).

10. The ability to sell the property to others at a fair price.

See Florida Rock Indus., Inc. v. United States, 791 F.2d 893 (Fed. Cir. 1986); Park Ave.Tower Assocs. v. City of New York, 746 F.2d 135, 139 (2d Cir. 1984); Pompa Constr. Corp. v.

Saratoga Springs, 706 F.2d 418, 424 (2d Cir. 1983); Orion Corp. v. Washington, 747 P.2d 1062,1085 (1987).

11. The general power of government to regulate.

See Pace Resources, 808 F.2d at 1033. But see Nemmers v. City of Dubuque, 716 F.2d1194, 1200 (8th Cir. 1983); Kasparek v. Johnson County Bd. of Health, 288 N.W.2d 511, 518(1980).

12. The harshness of the local regulatory and legal climate.

See Suarez v. Gelabert, 541 F. Supp. 1253, 1260 (D.P.R. 1982); Oceanic California, Inc. v.City of San Jose, 497 F. Supp. 962, 974 (N.D. Cal. 1980).

D. Developing a Working “Test” for Investment-backed Expectations

In Reahard v. Lee County, the Eleventh Circuit remanded a case to allow the fact-finder toapply the Penn Central multi-factor analysis. 968 F.2d 1131, 1136 (11th Cir. 1992), cert. denied, 115S. Ct. 1693 (1995). The Eleventh Circuit directed the lower court to answer the following questionsconcerning investment-backed expectations of the landowner:

1. What is the history of the property?

• When was it purchased?

• How much land was purchased?

• Where was the land located?

• What was the nature of the title?

• What was the composition of the land and how was it initially used?

2. What is the history of development?

• What was built on the property and by whom?

• How was it sub-divided and to whom was it sold?

• What plats were filed?

• What roads were dedicated?

3. What is the history of zoning and regulation?

• How and when was the land classified?

• How was use proscribed?

• What changes in classification occurred?

4. How did development change when title passed?

5. What is the present nature and extent of the property?

6. What were the reasonable expectations of the landowner under state common law?

7. What were the reasonable expectations of the neighboring landowners under statecommon law?

8. What was the diminution in the investment-backed expectations of the landowner, ifany, after passage of regulation?

Lee County involved a landowner who sought to continue development of riverside property nearthe Gulf of Mexico in Florida. Lee County, however, had classified the property as a “ResourceProtection Area” (RPA) under its Comprehensive Land Use Plan. The classification limiteddevelopment of the property to a single residence or for uses of a recreational, open space, orconservation nature. The Eleventh Circuit directed the district court, on remand, to consider thesefactors in the determination of whether the landowner’s reasonable investment-backed expectationshad been frustrated. The Eleventh Circuit held that the answers to these questions would be thefactual basis to which the district court should apply the Penn Central multifactor inquiry.

The Eleventh Circuit believes that courts must weigh these factors in their determination of:(1) whether the landowner’s investment-backed expectations were reasonable; and (2) whether theregulation frustrates those expectations. Lower courts can use the Lee County questions to establishthe factual basis to apply the Penn Central reasoning. Texas courts may well find these factorspersuasive, especially because the case law has not been well-developed in Texas and because Texascourts have recognized that the federal approach to takings analysis is coextensive with the Texasapproach.

V.

DOLAN AND “ROUGH PROPORTIONALITY”

New land development projects, such as subdivisions, impose additional burdens on themunicipalities in which they take place. Consequently, municipalities often place conditions on thegranting of a permit to a developer as a means of requiring those who create the additional needsbrought on by new development to bear the costs associated with such growth. Many times, thoseconditions include a requirement that a property owner dedicate land, or an interest in land, to thecity. Two United States Supreme court cases articulate the current tests for determining whetherconditions that require the dedication of land constitute a taking under the Fifth Amendment of theFederal Constitution. The first, Nollan, supra, requires a court to evaluate the nexus between whatthe municipality seeks to exact from the developer by way of imposing a condition that takes land andthe projected impact of the proposed development. Following Nollan, there was uncertaintyregarding the degree of nexus that a municipality was required to establish in order for a landdedication condition to pass constitutional muster. In Dolan, supra, the Supreme Court clarifiedNollan by adopting the “rough proportionality” test as the means for determining the degree of nexusrequired between an exaction imposed by a municipality and the projected impact of a proposeddevelopment.

Before adopting the “rough proportionality” test, the Dolan Court considered the tests thatexisted among the states for determining the degree of nexus required for a condition to beconstitutionally valid. The state tests considered by the Court have been organized into threecategories: (1) the judicial deference test; (2) the “specifically and uniquely attributable” test, and “thereasonable relationship” test. Id., 512 U.S. at 390-92. The principal difference among the three testsis the requisite degree of nexus between the exaction and the projected impact caused by thedevelopment. The Court rejected the judicial deference tests used in states such as Montana and NewYork as “too lax.” On the other hand, the Court found that the specifically and uniquely attributabletest used in states such as Illinois to be more exacting than what was required by the FederalConstitution. The Court ultimately concluded that the reasonable relationship test, used in states suchas Texas, was closest to the federal constitutional norm. Id. at 391. The test adopted by the DolanCourt was labeled the rough proportionality test because the majority wanted to differentiate thenewly articulated federal constitutional standard from the less demanding rational basis test which theCourt implied was analogous to the judicial deference test.

The rough proportionality standard adopted by the Court in Dolan requires a court to conducta more exacting scrutiny of municipal exactions than does the judicial deference test, and a lessexacting scrutiny than does the specifically and uniquely attributable test. Stated differently, thespecifically and uniquely attributable test guarantees an individual more protection than federally

3The specifically and uniquely attributable test requires the municipality to show that theexaction is directly proportional to the specific need created by the proposed development. Dolan, 512 U.S. at 389-90.

4Under the judicial deference test, a court would find that the required degree of nexusbetween the exaction and the need created by the development exists by the mere existence of astatute calling for the exaction. A court utilizing the judicial deference test simply defers to thelegislature which, in enacting the statute authorizing the exaction, has already decided that theprojected impact is addressed by the exaction.

mandated,3 the judicial deference test does not provide enough protection,4 and the reasonablerelationship test provides a constitutionally sufficient amount of protection.

In determining that the reasonable relationship test provides a constitutionally sufficientamount of protection under the Fifth Amendment, the Court cited the Texas Supreme Court’sdecision in Turtle Rock, supra, as a jurisdiction that used this test. Dolan, 512 U.S. at 390-91.Consequently, the United States Supreme Court has reviewed and addressed the Texas SupremeCourt’s analysis in Turtle Rock and has held that the test passes constitutional muster under theDolan standard.

A. Turtle Rock

In Turtle Rock, the Texas Supreme Court set forth a test to determine the validity ofordinances requiring dedications, or fees in lieu of dedicating property, for park purposes. Drawingupon previous Texas Supreme Court cases, the Court held that a city may enact reasonableregulations to promote the health, safety and general welfare of its citizens provided that theordinances meets two requirements: (1) the regulation must accomplish a legitimate goal; and (2) theregulation must be reasonable and not arbitrary. Id., 680 S.W.2d at 805.

The first requirement depends upon whether or not reasonable minds could differ that theordinance has a substantial relationship to the public health, safety, morals, or general welfare. TheCourt in Turtle Rock recognized that cities may impose reasonable regulations as a condition for theuse of property or as a condition precedent to the subdivision of land and held that the CollegeStation ordinance in question was a regulatory response to park needs created by the developer’s useof land. As a result, the ordinance satisfied the first level of judicial scrutiny. Id. at 805-806.

The second test articulated in Turtle Rock identified the reasonableness requirement for avalid ordinance. The Court stated that the second requirement for park land dedication is whethera reasonable connection exists between the increased population arising from the subdivisiondevelopment and the increased park and recreation needs in the neighborhood. Citing The AmericanLaw Institute, the Supreme Court stated that “[t]he Code adopts the position that developers maybe required to provide streets and utilities but only of the quality and quantity reasonably necessaryfor the proposed development.” Id. at 807. Among the important elements to be considered include

the extent of the dedication and the size of and number of subdivision lots. The Court opined thatthe requested exaction would be deemed reasonable if imposed to offset the need created by theproposed development. Id.

B. The First Question: Is Dolan Applicable Only to Development Exactions that Require a Landowner to

Dedicate Property to the Government

A question that courts have been presented with after Dolan is (1) whether Dolan is applicableonly to a takings claim whereby a municipality exacts title to real property, on the one hand, inexchange for conferring a discretionary benefit on an ad hoc basis, with the other hand, or (2) whetherDolan can also be applied to an economic takings claim, as well as a title taking claim.

1. Overview

Three types of “regulatory takings” claims have been recognized by the United StatesSupreme Court: (1) a physical invasion (Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.419 (1982); (2) a title dedication or exaction claim in which real property is compelled as a conditionof development approval (Dolan); and (3) a general economic taking in which regulation restricts allor substantially all of the use of property. Robert H. Freilich and Elizabeth A. Garvin, Takings AfterLucas: Growth Management, Planning and Regulatory Implementation Will Work Better ThanBefore, 22 Stetson L. Rev. 409, 411 (1993).

Economic takings, as distinguished from physical or title takes, constitute the vast majorityof inverse condemnation claims based on regulatory takings. The rule adopted in Agins, supra,stating that a land-use regulation does not effect a taking if it “substantially advance[s] legitimate stateinterests” and does not “den[y] an owner economically viable use of his land,” is the general rulegoverning all regulatory takings and is based upon the rational basis test. Id., 447 U.S. at 260. Thehigher scrutiny test, “rough proportionality,” applies only to the narrow categorical exceptions ofphysical and title takes.

Since Dolan, state courts have applied the rough proportionality test solely to title dedicationsor exactions. See, e.g., Sparks v. Douglas County, 904 P.2d 738, 745-46 (Wash.1995) (sustainingrequired dedication under Dolan for road right-of-way where county had documented existing roaddeficiencies and had calculated increase in traffic and the specific need for dedication based uponimpacts of the proposed subdivisions). Similarly, the federal courts of appeals have steadfastlyrefused to apply this heightened level of scrutiny to inverse condemnation claims based on aneconomic taking and have declared that this standard only applies to title dedication or exactionclaims. See, e.g., New Port Largo Inc. v. Monroe County, 95 F.3d 1084, 1088, (11th Cir.1996), cert.denied, ____ U.S. ____,117 S. Ct. 2514 (1997) (Dolan’s rough proportionality test does not applyto county that rezoned landowner’s beach front property from residential duplex use to private airportuse); Clajon Prod. Corp. v. Petera, 70 F.3d 1566, 1578-79 (10th Cir.1995) (Dolan’s rough

proportionality does not apply to state regulations that limit the right to hunt surplus game onrancher’s property).

In an economic taking case, such as the instant lawsuit, the scope of legitimate state interestsis extremely broad and challenged regulations will not be construed to effectuate a taking as long asthe governmental entity has rationally concluded that the health, safety, morals or general welfare willbe promoted by the regulation. Penn Central, 438 U.S. at 125. When the relationship between thepublic purpose and the regulation is analyzed, the Supreme Court has consistently held that aregulation “substantially advances” a legitimate state interest if the regulation is rationally related tothe public interest. Id. at 125-127; Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 242 (1984).

2. The Supreme Court has Never AppliedHeightened Scrutiny to Inverse Condemnation Claims

Based Solely on an Economic Taking

The application of Dolan’s rough proportionality standard to inverse condemnation claimsbased on an economic taking (other than in the narrow categorical title or exaction takings) wouldyield an outright assault on a governmental entity’s police powers to plan and zone. Such a decisionwould undermine a governmental entity’s ability to effectively engage in land-use planning and wouldjeopardize the health, safety, morals and general welfare of the community. The Court recognizedthis in Pennsylvania Coal, supra: “Government could hardly go on if, to some extent, values incidentto property could not be diminished without paying for every such change in the general law. As longrecognized, some values are enjoyed under an implied limitation, and must yield to the police power.”Id., 260 U.S. at 413.

In Penn Central, the Court articulated a comprehensive test for analyzing inversecondemnation claims. The Court stated that three factors should be considered in identifying aregulatory taking: the economic impact of the regulation on the claimant; the extent to which theregulation has interfered with distinct investment-backed expectations; and the character of thegovernment action. Id., 438 U.S. at 124. The Penn Central Court further noted that a taking may“more readily be found when the interference with the property can be characterized as a physicalinvasion by the government, than when interference arises from some public program adjusting thebenefits and burdens of economic life to promote the common good.” Id.

Since Penn Central, the Supreme Court has recognized three types of regulatorytakings–physical, title, and economic. First, the Court has determined that a physical invasion or aregulatory activity that produces a physical invasion will sufficiently support an action for inversecondemnation. See Kaiser Aetna v. United States, 444 U.S. 164 (1979). Second, the Court hasfound an inverse condemnation claim to lie where a regulation imposes title dedication as a conditionof development approval without a rational nexus or rough proportionality to the need created by thedevelopment. Nollan; Dolan. Third, in economic regulatory taking cases, the Court has longdetermined when a regulatory activity fails to substantially advance a legitimate state interest or

denies a property owner all or substantially all economically viable use of an owner’s land, it will giverise to an inverse condemnation claim. See Agins, 447 U.S. at 260; Lucas, 505 U.S. at 1003.

In Nollan, the Court required that in cases involving permanent dedication of title, an“essential nexus” must exist between the title condition imposed and the stated police power objectiveof requiring development to meet the needs created by the development. Id., 483 U.S. at 837. Underthis test, the dedication must serve the same governmental purpose as the regulation. Hence, theCourt employed a heightened level of scrutiny differentiating the ad hoc, factual inquiry balancing,test of an economic take as enunciated in Penn Central.

In Dolan, the Court addressed the question of a second nexus required between the city’spermit conditions of title or exaction and the projected impact caused by the proposed development.Id., 512 U.S. at 388. To evaluate this question, the Dolan Court articulated a two-pronged test.First, as determined in Nollan, there must exist an essential nexus between legitimate state interestsand the permit conditions. Id. at 386. Second, the exaction required by the permit condition mustbe roughly proportional to the projected impact of the proposed development. Id. at 391. Under thisprong, the government bears the burden of proof and must show that the dedication or exaction isroughly proportional to the impact of the project. Id. The Court intended this two-prong test tofunction as a higher standard of review. Finally, the Court noted that traditional land use planingtools such as dedications for streets, sidewalks and other public ways will generally be consideredreasonable exactions. Id. at 395.

The Dolan Court recognized that the reasonable relationship test imposed by the majority ofstate courts would satisfy the dual nexus test. The Court found that the majority of the state courtsalready used an intermediate level of scrutiny in title or monetary exactions in lieu of dedication,referencing, among others, the Texas Supreme Court’s decision in Turtle Rock.

Compliance with standards and conditions always involves some forbearance or performanceon the part of the landowner. Meeting a height, setback or rear yard limitation on structures involvesforegoing building to greater area or elevation. Such collective limitations or requirements, however,do not involve dedication of land to the public, but establish the net development potential for theproperty. Such collective limitations form the basis of an economic taking challenge, not a physicalor title taking challenge.

To apply Dolan’s rough proportionality test to economic takings claims would result in eachand every standard or condition applied to a development proposal being subject to an individual“substantially advances” taking challenge, rather than a challenge to the collective limits imposed bythe regulations on the exercise of property rights. A standard height limitation might be challengedunder the theory that it was not “roughly proportional” to the “nature and extent” of the proposeddevelopment. Municipalities would be faced with the prospect of modifying or defending each andevery one of its regulatory standards on an ad hoc basis for every development project in order toavoid rough proportionality challenges.

Economic takings, as distinguished from physical or title takes, constitute the vast majorityof inverse condemnation claims based on regulatory takings. In economic taking claims, the Courtin Agins stated that a land-use regulation does not effect a taking if it “substantially advance[s]legitimate state interests” and does not “den[y] an owner economically viable use of his land.” Id.,447 U.S. at 260.

Economic takings have been reviewed with great deference by the Supreme Court, specificallywhen it comes to what constitutes a state interest and the relationship required between the regulationand the public interest. As to the first prong of this test, the scope of legitimate state interests isextremely broad and will be given the widest latitude under the taking clause and the substantive dueprocess clause. See Concrete Pipe and Products, Inc. v. Construction Laborers Pension Trust, 508U.S. 602, 637 (1993); Hawaii Housing Auth., supra; Berman v. Parker, 348 U.S. 26 (1954).

Under the second prong of the test, a court must determine whether the property maintainsany permanent beneficial value, when viewed as a whole. See, e.g., Concrete Pipe, 508 U.S. at 643-44; Pennell v. City of San Jose, 485 U.S. 1 (1988); Hodel v. Irving, 481 U.S. 704 (1987). In Lucas,the Court concluded that unless the owner is denied all economically viable use of the land, then acourt should return to the traditional Penn Central balancing of interests test. Id., 505 U.S. at 1003.The viability of the land has traditionally been evaluated in its totality. See, e.g., Concrete Pipe, 508U.S. at 643-44 (1993) (“To the extent that any portion of the property is taken, that portion is alwaystaken in its entirety, the relevant question, however, is whether the property taken is all, or only aportion of the parcel in question.”).

3. The Rough Proportionality Test Applies only to Title or Exaction Takingsand not to Economic Taking Claims

Numerous cases have properly declined to apply Dolan’s rough proportionality test to claimsother than title or exaction takings. In New Port Largo, the court rejected applying Dolan’s roughproportionality standard to an economic regulatory taking claim. Id., 95 F.3d at 1088. In that case,a landowner sued the county for a temporary regulatory taking and deprivation of due process afterthe county rezoned its beach front property from residential duplex use to private airport use. Id. at1087. The court in New Port Largo rejected using the heightened level of scrutiny required underthe Nollan/Dolan paradigm. The court explained:

In [Nollan and Dolan] a state had demanded that a person open his or her propertyto public traffic, again without just compensation. That fact distinguished [Plaintiff’s]situation: the regulation in this case told [Plaintiff] how it could use the property forprofit, but did nothing to require [Plaintiff] to open its property to the public for usejust as the public wished.

Id. at 1088.

The Tenth Circuit, in Clajon, also held that Dolan’s rough proportionality test did not applyto an economic regulatory taking. Id., 70 F.3d at 1578. In Clajon, the issue before the court waswhether Wyoming’s two-license limit on supplemental hunting licenses issued to large landownersviolated the takings and equal protection clauses of the Fifth Amendment. Id. at 1569. Thelandowners had alleged that they enjoyed a common law property right to hunt surplus game on theirlands and that the Wyoming regulation constituted an inappropriate “leveraging of police power”which deprived them of their property rights without justly compensating them. Id. at 1576.

The court in Clajon declined to apply Dolan’s rough proportionality test to the landowners’claim. In so doing, the court recognized that Dolan’s rough proportionality does not apply to allregulatory takings, but is instead “limited to the context of development exactions where there is aphysical taking or its equivalent.” Id. at 1578. The court further argued that this test must be limitedto development exactions “[g]iven the important distinctions between general police powerregulations and developmental exactions [or] physical taking cases....” Id. The court concluded bynoting as follows:

In our judgment, both Nollan and Dolan follow from takings jurisprudence’straditional concern that an individual cannot be forced to dedicate his or her land topublic use without just compensation. That is Nollan and Dolan essentially view theconditioning of a permit based on the transfer of a property interest–i.e., aneasement–as tantamount to physical occupation cases to those situations in which thegovernment achieves the same end (i.e., the possession of one’s physical property)through a conditional permitting procedure.

Similarly, in Springer, Grubb & Assocs. v. City of Hailey, 903 P.2d 741, 747 (Idaho 1995), the IdahoSupreme Court held that Dolan is limited to property exactions and does not apply to regulatoryrezoning activities because

Dolan is distinguishable. It involved the reasonableness of conditions exacted on aproperty owner before the community would grant a building permit. One conditionrequired the owner to dedicate a portion of his property for public use as abicycle/pedestrian pathway. The United States Supreme Court’s holding required thelower court to make a finding as to “proportionality” between the exactions requiredand the projected impact of the proposed development. Here there has been noexaction, nor a taking for all uses for any portion of the subject property.

Id. at 747. See also Pringle v. City of Wichita, 917 P.2d 1351, 1357 (Kan.Ct.App.1996) (Dolan’srough proportionality test does not apply to a challenge to a city’s decision to close an intersectionwhile completing a new four lane freeway); Arcadia Dev. Corp. v. City of Bloomington, 552 N.W.2d281, 286 (Minn.Ct.App.1996) (Dolan’s rough proportionality test does not apply to challenge to cityordinance requiring mobile home park owners who close their parks to pay relocation costs to parkresidents).

In short, it is clear that Dolan and its progeny should apply only to instances wheregovernment exacts title through the development process.

4. Del Monte Dunes Answer the First Question

On May 24, 1999, the United States Supreme Court handed down its decision in City ofMonterey v. Del Monte Dunes at Monterey, Ltd., in which the Court held, inter alia, that Dolanapplies only to development exactions that condition approval of development on the dedication ofreal property to public use.

The Court’s discussion of Dolan is brief.

In the course of holding a reasonable jury could have found the city’s denial of thefinal proposal not substantially related to legitimate public interests, the Court ofAppeals stated: “[e]ven if the City had a legitimate interest in denying Del Monte’sdevelopment application, its action must be ‘roughly proportional’ to furthering thatinterest . . . . That is, the City’s denial must be related both in nature and extent to theimpact of the proposed development.” 95 F.3d, at 1430, quoting Dolan, supra, at391.

Although in a general sense concerns for proportionality animate the Takings Clause,see Armstrong v. United States, 364 U.S. 40, 49 (1960) (“The Fifth Amendment’sguarantee . . . was designed to bar the Government from forcing some people aloneto bear public burdens which, in all fairness and justice, should be borne by the publicas a whole”), we have not extended the rough-proportionality test of Dolan beyondthe special context of exactions--land-use decisions conditioning approval ofdevelopment on the dedication of property to public use. See Dolan, supra, at 385;Nollan v. California Coastal Comm’n, 483 U.S. 825, 841 (1987). The rule appliedin Dolan considers whether dedications demanded as conditions of development areproportional to the development’s anticipated impacts. It was not designed toaddress, and is not readily applicable to, the much different questions arising where,as here, the landowner’s challenge is based not on excessive exactions but on denialof development. We believe, accordingly, that the rough-proportionality test of Dolanis inapposite to a case such as this one.

City of Monterey v. Del Monte Dunes at Monterey, Ltd., ___ U.S. ___, (1998) (No. 97-1235, 1997Term); Slip Op. at 10-11; 1999 WL 320798.

Accordingly, there appears to no longer be a legitimate dispute that Dolan only applies wherereal property is required by the government to be dedicated to public use as a condition of the rightto develop property.

C. The Second Question: Is Dolan Applicable Only to Ad Hoc,

Adjudicative Decisions, and not to Generally Applicable Legislative Ordinances

In Dolan, the Supreme Court expressly distinguished its holding from traditional zoning,exaction and development regulations that did not require the dedication of land from a propertyowner in an adjudicative manner.

The sort of land use regulations discussed in the cases just cited, however, differ intwo relevant particulars from the present case. First, they involved essentiallylegislative determinations classifying entire areas of the city, whereas here the citymade an adjudicative decision to condition petitioner’s application for a buildingpermit on an individual parcel. Second, the conditions imposed were not simply alimitation on the use petitioner might make of her own parcel, but a requirement thatshe deed portions of the property to the city.

Dolan, 512 U.S. at 385. We have already addressed the second limitation noted in the above-referenced quote as to why Dolan is inapplicable to matters that do not involve the dedication ofproperty. The other limitation, which will be more fully described in this section, is that Dolan doesnot apply unless there is an adjudicative decision to force a property owner to dedicate property tothe government.

One of the focal points of the Dolan holding was that the City of Tigard was attempting toexact a dedication of land from the property owner in an adjudicative manner. That is, the city wasnot applying a generally formulated legislative policy, but rather decided to exact the land upon thelandowner’s application for a building permit. As a result, the courts considering the question havealmost uniformly held that the rough proportionality requirement of Dolan only applies to anadjudicative decision by a local government, and not to an analysis of legislative requirements.

The Supreme Court of Arizona recently analyzed the applicability of Dolan to a waterresources development fee that the City of Scottsdale imposed on all new developments within thecity. The Arizona Supreme Court expressly recognized that Dolan applied only in an adjudicativesetting, and not to the application of a legislatively created standard.

In Dolan, the Chief Justice was careful to point out that the case involved a city’sadjudicative decision to impose a condition tailored to the particular circumstancesof an individual case. Because the Scottsdale case involves a generally applicablelegislative decision by the city, the court of appeals thought Dolan did not apply. Weagree, although the question has not been settled by the Supreme Court.

5The Arizona Supreme Court also distinguished the economic regulation imposed by the Cityof Scottsdale from Dolan because in Dolan, “the city demanded that Mrs. Dolan cede a part of herproperty to the city, a particularly invasive form of land regulation that the court believed justifiedincreased judicial protection for the landowner. Here, Scottsdale seeks to impose a fee, aconsiderable more benign form of regulation.” Id.

Homebuilders Assoc. of Central Arizona v. City of Scottsdale, 930 P.2d 993, 1000 (Ariz. 1997)(citations omitted).5

In Arcadia Dev. Corp., the Minnesota Court of Appeals held that a city ordinance requiringmobile home park owners who closed their parks to pay relocation costs to park residents wouldsurvive a Dolan challenge because Dolan

applies only to adjudicative determinations that condition approval of a proposed landuse on a property transfer to the government, which, standing alone, would clearlyconstitute a taking. Accordingly, cases interpreting Dolan have confined its “roughproportionality” analysis to adjudicative land-dedication situations or to classic“subdivision exaction” cases. Because this case involves a challenge to a citywide,legislative land-use regulation, Dolan’s “rough proportionality” test does not apply.”

Id., 552 N.W.2d at 286 (citation omitted).

Similarly, the court in Pringle, in rejecting a Dolan challenge to a city’s decision to close astreet and divert traffic away from a landowner’s property, noted the express limitations placed bythe United States Supreme Court on the application of Dolan.

First, in Dolan the city conditioned issuance of a permit for store expansion on theowner’s dedication of a part of her property for improvement of a drainage systemand construction of a pedestrian/bicycle path. Plaintiffs here have not been requiredto deed property to the city. Second, in Dolan, the Supreme Court emphasized thatit was concerned with an adjudicative decision, not with decisions of a legislativenature. The City’s acts in this case regulating traffic under its police power fall withinthe category of legislative decisions.

Id., 917 P.2d at 1357 (citations omitted).

Also, the Supreme Court of Georgia in Parking Ass’n of Georgia, Inc. v. City of Atlanta, 450S.E.2d 200 (Ga. 1994), cert. denied, 515 U.S. 1678 (1995), held that Dolan did not apply to amunicipal regulation that required a landowner, at the landowner’s sole cost, to install curbs,landscaping and trees in surface parking lots. Factually, the case stemmed from an Atlanta CityCouncil ordinance requiring certain existing surface parking lots to include landscaped areas equalto at least 10% of the paved area and to have at least one tree for every eight parking spaces. Asapplied to the plaintiff Parking Association of Georgia, the ordinance affected approximately 350

parking lots, at a cost of approximately $12,500 per lot, for a total of $4,375,000. Additionally, therequired trees would obscure existing advertising signs and cause the plaintiff to lose contracts worthapproximately $1,636,000. Parking Ass’n of Georgia v. City of Atlanta, 515 U.S. 1116 (1995)(dissenting opinion on denial of writ of certiorari).

In spite of these facts, the Georgia Supreme Court held that Dolan was inapplicable becausethe ordinance in question was a legislative determination, rather than an individualized determination.The Georgia Supreme Court explained as follows:

Plaintiff’s reliance upon Dolan v. City of Tigard is misplaced. In that case, the cityrequired an applicant for a building permit to deed portions of her property to the city.The Supreme Court held the required dedication violated the Takings Clause becausethe city did not “make some sort of individualized determination that the requireddedication is related both in nature and extent to the impact of the development.”Here the city made a legislative determination with regard to many landowners andit simply limited the use the landowners might make of a small portion of their lands.

Id., 450 S.E.2d at 203 n.3 (citations omitted).

As established not only by the Supreme Court’s language in Dolan, but by other courts thathave interpreted that language, there is strong authority to limit Dolan’s rough proportionalitydetermination only to case-by-case, adjudicative decisions that involve the creation of conditions, onan ad hoc basis, as a restriction upon the development of property that requires a property owner todeed property to local government, and not to the application of a legislatively created standard. TheSupreme Court has not yet squarely addressed or answered this question.

VI.

ANALYSIS OF GROWTH MANAGEMENT PLANS AND GROWTH MORATORIA

The above-referenced discussion of taking, due process and equal protection challengesprovides a good overview of the law in those areas in regards to zoning and land use challengesgenerally. Since growth management plans present constitutional issues not typically associated withtraditional zoning and land use challenges, a more detailed look at cases that address growthmanagement devices is warranted.

A. Illustrative Growth Management Cases

In Golden v. Planning Board of the Town of Ramapo, 285 N.E.2d 291 (N.Y.), appeal dism'd,409 U.S. 1003 (1972), the New York Court of Appeals upheld the timing and sequential control ofresidential subdivision activity for a period of up to 18 years based upon three six-year capitalimprovement programs. Id. at 304-05. Ramapo is considered a landmark decision because it the firstreported case to address the validity of linking the timing and sequencing of development with capital

improvements, tying the purchase of development easements to reduction in tax assessments, andintegrating the development plan, the capital improvement budget and the zoning ordinance. SeeFreilich and Greis, "Timing and Sequencing Development: Controlling Growth" in Future Land Use,Energy, Environment and Legal Constraints, 59-106 (Burchell and Listokin, Eds., Rutgers Univ.1975); Ramapo, 285 N.E.2d at 301-04.

In Ramapo, the Town adopted its 18 year growth management plan for the purpose of"eliminating premature subdivision and urban sprawl." Id. at 294. The plaintiffs -- a builders'association and a group of landowners affected by the Town's growth management plan -- challengedthe constitutionality of the Town's actions. As a threshold constitutional issue, the court rejected theplaintiffs' assertion that the Town's growth management plan was designed as an exclusionary device.

[F]ar from being exclusionary, the present amendments merely seek, by theimplementation of sequential development and timed growth, to provide a balancedcohesive community dedicated to the efficient utilization of land. The restrictionsconform to the community's considered land use policies as expressed in itscomprehensive plan and represent a bona fide effort to maximize population densityconsistent with orderly growth.

Id. at 301. In upholding the concept of growth management, the court also added that the purposeof the Town's plan was "to prevent premature subdivision absent essential municipal facilities and toinsure continuous development commensurate with the Town's obligation to provide such facilities."Id. at 302.

After upholding the legitimate purposes behind the Town's growth management plan, thecourt addressed the plaintiffs' assertion that such plan constituted a taking of their property. Whileacknowledging that the Town's regulations had a significant impact on the ability of the plaintiffs'property to be developed in the short term, the court held that no taking was established because theregulations were not permanent in character.

Without a doubt restrictions upon the property in the present case are substantial innature and duration. They are not, however, absolute. The amendments contemplatea definite term, as the development points are designed to operate for a maximumperiod of 18 years and during that period, the Town is committed to the constructionand installation of capital improvements. The net result of the on-going developmentprovision is that individual parcels may be committed to a residential development useprior to the expiration of the maximum period. . . . While even the best of plans maynot always be realized, in the absence of proof of the contrary, we must assume thatthe Town will put its best effort forward in implementing the physical and fiscaltimetable outline under the plan.

Id. at 303. In closing, the court noted as follows:

In sum, where it is clear that the existing physical and financial resources of thecommunity are inadequate to furnish the essential services and facilities which asubstantial increase in population requires, there is a rational basis for "phasedgrowth" and hence, the challenged ordinance is not violative of the Federal and StateConstitutions.

Id. at 304.

The vast majority of the courts that have addressed the growth management issues discussedin Ramapo have followed Ramapo's lead. For example, in Boulder City v. Cinnamon Hills Assocs.,871 P.2d 320 (Nev. 1994), the Nevada Supreme Court rejected a developer's claim that the City'sdenial of his application for a building permit, pursuant to the City's growth control ordinance, wasunconstitutional. Id. at 324-27. In that case, Boulder City had adopted a growth control ordinanceto limit commercial and residential growth in its community. The ordinance limited the number ofapartment complexes and motels that could be developed in the City during any one year byestablishing a limit of 120 living units per year, with a single developer being able to obtain only anallotment of 30 living units per year. Id. at 321. A corporate developer who was denied anapplication for a building permit to construct a senior citizen housing complex challenged the City'sgrowth control ordinance by asserting a claim for a violation of its equal protection and due processrights, and a taking of property without just compensation. Id.

The court denied the developer's taking claim on the basis that Boulder City's growth controlordinance only denied the developer the right to build multi-unit projects and not other uses.Accordingly, the court held that the City's restrictions did not destroy all economically viable use ofthe developer's property. Id. at 324-25 ("Even assuming that [the developer] had exercised its optionto purchase the development property, denial of a permit to build living quarters for the elderly didnot destroy all viable economic value of the prospective development property."). Similarly, the courtdisposed of the developer's substantive due process claim because the City's growth control ordinancewas a valid exercise of the City's police powers and, accordingly, made the grant of a building permitdiscretionary. Since the city council had discretion in granting or denying the building permitapplication pursuant to the terms of the city's growth control ordinance, the court held that thedeveloper had no entitlement and no constitutionally protected interest in the building permit. Id. at324. Finally, the court rejected the developer's claim that the growth control ordinance violated itsequal protection rights since there was no suspect classification involved and, under a rational basisstandard, the developer failed to prove of violation of equal protection. Id. at 326.

In Woodbury Place Partners v. City of Woodbury, 492 N.W.2d 258 (Minn. Ct. App. 1993),cert. denied, 508 U.S. 960 (1993), the Minnesota Court of Appeals held that a moratorium denyinga property owner all economically viable use of his property for two years was not a taking ofproperty. Factually, this case arose when the City of Woodbury adopted an interim moratorium thatprohibited all development on certain properties that were being studied by the City for trafficcongestion problems. Id. at 259. The Minnesota Court of Appeals defined the issue as follows:"Does a two-year moratorium . . . which denies all economically viable use of property to protect a

planning process constitute a compensable `taking' under the Fifth Amendment?" Id. at 259. Thecourt held that it did not.

The court determined that although the property owner was denied all use of its property forthe two-year period in question, the denial of all economically viable use for two years was differentfrom the denial of all economically viable use as discussed in pertinent taking cases. Id. at 261. Thecourt rejected the property owner's attempts to equate its loss of use to a "total" taking by narrowlydefining the measurable property interest as a two-year segment, and held that the regulation mustbe measured by the economic burden against the value of the property as a whole, rather than againstdiscrete segments.

When measured against the value of the property as a whole, rather than against onlya two-year time frame, the moratorium did not deny the [property owner] "alleconomically viable use" of its property. Delaying the sale or development ofproperty during the governmental decision-making process may cause fluctuations invalue that, absent extraordinary delay, are incidents of ownership rather thancompensable takings.

Id.

Another illustrative case is Long Beach Equities, Inc. v. County of Ventura, 231 Cal.App.3d1016 (Cal. Ct. App. 1991), cert. denied, 505 U.S. 1219 (1992), wherein the California Court ofAppeals held that a city ordinance limiting the number of building permits to be issued annually wasconstitutional. Factually, Ventura County adopted certain guidelines to assure the "efficient provisionof urban services and sound urban land use planning," and to avoid "the problems and costsassociated with urban sprawl" through coordinated planning with other local governmental entities.The County's guidelines "provided that urban growth of developing communities in Ventura Countyshould proceed in a compact and logically expanding form which includes satisfactory permanentopen space areas within physically developed land." Id. at 1025.

The City of Simi Valley, to facilitate Ventura County's planning guidelines, passed an"urgency interim ordinance" that imposed a partial moratorium on providing approval for various landuse permits until the City could review and revise its comprehensive plan to comport with theCounty's development guidelines. Id. at 1026-27. Additionally, the City adopted a temporary growthmanagement plan that severely limited the number of building permits to be issued annually. Thebuilding permit restrictions, which were implemented in July of 1986, were scheduled to expire onJanuary 1, 1996. Id. at 1027.

A developer, who desired to build 249 single-family residences on a 250-acre parcel of landit owned adjacent to the City, contended that the land use regulations of the County and City sogreatly delayed its development plans as to render them economically infeasible and a violation of theconstitution. Specifically, the developer sued under theories of inverse condemnation, denial ofsubstantive and procedural due process, denial of equal protection and a deprivation of civil rights

under 42 U.S.C. § 1983. Id. at 1028-29. The court rejected the developer's taking claim since itfound that the growth control plans substantially advanced legitimate state interests and that suchplans did not deprive the developer of all economically viable use of its land. Specifically, in regardsto the city's building permit limitations, the court noted that "[b]y limiting the rate, distribution,quality and type of residential development on an annual basis, with periodic reviews of the ongoingsituation, [the City] seeks `to improve local air quality, reduce traffic demands . . . and ensure futuredemands for such essential services as water, sewers and the like are met. . . .'" Id. at 1030.

The court also rejected the developer's claim that the delay in its ability to develop its propertyconstituted a taking.

The instant temporary ordinance [adopted in July of 1986] calls for a reevaluation in1991 of its restrictions, pursuant to the 1990 census and it automatically expires in1996. Unless a temporary moratorium is total and is unreasonable in purpose,duration or scope, the restrictions it places on development are not compensable.

Id. at 1035.

Similarly, the court rejected the developer's due process and equal protection challenges sincethe County's guidelines and the City's ordinance were reasonably related to the public welfare. Id.at 1040. Additionally, because there was no constitutional violation, the court also rejected thedeveloper's 1983 claims. Id. at 1040-41.

Cases from other jurisdictions also support the general proposition articulated in the above-discussed cases -- that growth management planning and regulatory implementations such asmoratoriums do not deprive properties of all use. The standard for these cases, and the standardrequired of a regulation in order to avoid a taking claim, is "reasonable use over a reasonable periodof time," as measured by the local government's comprehensive plan or other growth managementprograms. See, e.g., McCutchan Estates Corp. v. Evansville-Vanderburgh County Airport Auth.Dist., 580 N.E.2d 339, 343 (Ind. Ct. App. 1991) (administrative delay of nine months before grantingdevelopers primary approval of subdivision, while awaiting determination of whether proposedrunway would be developed in area of subdivision, was not so extraordinary as to amount tounconstitutional temporary taking); Dufau v. United States, 22 Cl. Ct. 156, 162 (Cl. Ct. 1990) (factthat process leading to issuance of permits for fill of wetlands took almost 16 months did notconstitute extraordinary delay so as to constitute a temporary taking of the land); Tocco v. NewJersey Council on Affordable Hous., 576 A.2d 328, 330 (N.J. Super. Ct. App. Div. 1990), cert.denied, 499 U.S. 937 (1991) (18-month land development moratorium imposed on municipality inwhich land was scarce, for purpose of enabling municipality to fulfill its constitutional obligation toprovide its fair share of low and moderate income housing, did not result in an unconstitutional takingof affected property because, absent extraordinary delay, any decrease in the value of property duringthe land development moratorium was a mere incident of ownership); Zilber v. Town of Moraga, 692F.Supp. 1195, 1206-07 (N.D. Cal. 1988) (a one-and-a-half-year development moratorium in orderto develop comprehensive scheme for regulation of open space was neither unreasonable nor,

6Teague, 570 S.W.2d at 393, indicated that the following factors were to be considered indetermining whether a taking had occurred: (1) whether the property was rendered whollyuseless; (2) whether the governmental burden created a disproportionate diminution in economicvalue or cause a total destruction in the value; or (3) whether the government's action against aneconomic interest of an owner was for its own advantage.

standing alone, sufficiently burdensome to require compensation, even though property owner lostlucrative sale as a partial result of the moratorium); Guinnane v. City and County of San Francisco,197 Cal.App.3d 862, 867-69 (Cal. Ct. App. 1987) (city's more than one-year delay in processing realestate developer's building permit application to study possible environmental impact of developmentwas not so excessive as to constitute compensable temporary taking).

While Texas and Fifth Circuit authority on moratoriums and other growth managementtechniques is not as plentiful as in other areas of the country, there is authority supporting suchtechniques in both Texas case law and Fifth Circuit jurisprudence. For example, in Estate of Scottv. Victoria County, 778 S.W.2d 585 (Tex.App.-Corpus Christi 1989, no writ), Victoria County'ssewer plant became seriously overloaded due to the increase in the number of homes serviced by thesewer system, which resulted in a system shut down that caused enormous amounts of raw sewageto be discharged into a nearby creek. Additionally, the sewer system was operating in violation ofthe conditions of its operating permit and state and federal regulations. Id. at 588. In 1979, theCounty issued an order prohibiting the issuance of any future permits connecting to the sewer system.The sewer hookup moratorium lasted 7½ years until the County transferred the ownership of thesewer plant to a newly created utility district. Id. at 588-89. Owners of undeveloped tracts of landwho had sought sewer service during the 7½ year moratorium contended that the moratorium wasa taking because "(1) the moratorium was unreasonable or arbitrary because it rendered their propertywholly useless for 7½ years; [and] (2) the moratorium was unreasonable in its duration. . . ." Estateof Scott, 778 S.W.2d at 589. The court, after noting the taking consideration factors set out in Cityof Austin v. Teague, 570 S.W.2d 389, 393 (Tex. 1978)6 held that the record did not establish ataking.

A review of the record reveals that the evidence conclusively establishes thefollowing: (1) the sewer moratorium was adopted for a legitimate purposesubstantially related to the health, safety, and general welfare of the public; (2) thegovernment's action in prohibiting additional sewer hookups was not for its ownadvantage; (3) the regulation was reasonable and not arbitrary; and (4) the sewermoratorium did not render appellants' land wholly useless nor did it totally destroy theland's value.

Estate of Scott, 778 S.W.2d at 591.

There are also two Fifth Circuit cases of note. In Schafer v. City of New Orleans, 743 F.2d1086 (5th Cir. 1984), the City of New Orleans passed an ordinance prohibiting the issuance ofbuilding permits for fast-food restaurants in a certain neighborhood until the City completed a study

of the area. The moratorium was to last approximately one year. Id. at 1088. A landowner who hadcontracted to sell his property to McDonalds was effected by the moratorium and subsequently lostthe McDonalds deal. Id. at 1088. The court rejected the landowner's taking challenge and offeredsome rather broad language supporting moratoriums and other interim development controlmeasures.

The ordinance does not take an inch of the landowners' property. It does notdeny them the right in the future to use the property for any purpose that it may nowbe put to. It merely suspends the owner's ability to devote their property to aparticular use for 10½ months. . . .

Interim development control such as this moratorium have been found to playan important role in municipal planning. They aid in "bridging the gap betweenplanning and its implementation into legal measures." They may, as here, be used topreserve the status quo while study of the area and its needs are completed. Thismoratorium on land use serves a significant public purpose.

Study of, and, if study warrants, changes in land use control cannot becompleted instanter. While these are proceeding, there may be a dramatic increasein the number of potentially adverse uses. Building activity may increase or beexpected because of the fear that contemplated uses may be prohibited. Interimzoning or a moratorium may be necessary to prevent a plan's defeat before it isformulated. In determining whether stop-gap ordinances or moratoria are reasonable,their duration is an important consideration. Property owners should not be deprivedof the use of their property by an ordinance if its temporary character is but a ruse.Yet municipalities must be allowed a reasonable time within which to plancomprehensive zoning measures.

Id. at 1090.

Similarly, in Jackson Court Condominiums, Inc., supra, the court upheld the constitutionalityof the City's moratorium on the establishment of time-share condominiums in residential areas.Factually, the case arose when the City of New Orleans, in response to a rapidly growingphenomenon of time-share condominiums in the City, passed an ordinance creating a city-widemoratorium on time-shares within certain zoning classification areas, pending a comprehensive zoningstudy of time-sharing rentals. Id., 874 F.2d at 1072. The plaintiff, Jackson Court Condominiums,purchased an apartment building with the intent to convert it to luxury time-share condominiums.After the City passed the time-share condominium moratorium, the plaintiff was unable to completeits condominium conversion plans for the property. Id. at 1072-73.

In its subsequent suit against the City, the plaintiff claimed that the city-wide moratorium ontime-share arrangements violated its right to substantive due process. The court, however, rejectedthis claim citing the differential legislative standard in Shelton, supra, and by holding that the question

of whether the moratorium was reasonable was "at least debatable," and therefore would be upheldas a rational decision. Jackson Court, 874 F.2d at 1077-78.

Certainly the protection of residential integrity is a legitimate objective of a zoningregulation. [Citations omitted.] The City of New Orleans was concerned that theimplementation of time-share arrangements in residential neighborhoods wouldincrease the noise, littering, and vandalism which might be associated with transientusers. This was a legitimate concern of the city and was debatable. Therefore, themoratorium reaches the threshold established in Shelton for substantive due process.

Id. at 1078. The court also disposed of the plaintiff's equal protection claims, which were based onthe argument that the moratorium did not apply to other transient uses, such as boarding houses, bynoting that "as long as the classification is rationally related to a legitimate state objective, alegislature is allowed to attack a perceived problem piecemeal." Id. at 1079.

The Fifth Circuit also rejected the plaintiff's claims that the moratorium was a taking withoutjust compensation because the moratorium advanced a legitimate government interest and did notdeny the plaintiff of all economically viable use of its property. Id. at 1080-82. The court noted thatthe plaintiff could still use the apartment complex for apartments and that the plaintiff's particularintended use for the property was not relevant to a determination of whether economically viable usefor the property remained.

[The plaintiff] seems to rely upon the business failure while renting the property asapartments as establishing a fact question as to whether there was a taking ofconstitutional dimension from the viable economic use of its property. The recordshows, however, that [the plaintiff] took a knowledgeable risk in purchasing theproperty and failed. It was the market, rather than the city, which deprived [theplaintiff] of that potential use. There is no evidence to indicate that the city's actionwas the sole cause of the bankruptcy. This was a typical business failure, perhapsabetted somewhat by zoning, which is not at all uncommon when risky choices aremade by the business.

Id. at 1081.

Cases from other jurisdictions are in accord. In Schiavone Construction Co. v. HackensackMeadowlands Development Commission, 486 A.2d 330 (Sup. Ct. N.J. 1985), the HackensackMeadowlands Development Commission ("HMDC") imposed a moratorium on real estatedevelopment for the purpose of completing studies to determine the feasibility of a food distributioncenter. Id. at 330-31. The moratorium covered approximately 550 acres, included approximately115 acres of undeveloped land owned by plaintiffs. Id. While plaintiffs' zoning application requestinga use and bulk variance was pending, the HMDC had applied for a grant to be used for a developmentdesign analysis of the food center. Id. The HMDC received the grant and thereafter adopted aresolution authorizing a feasibility study of the food distribution study and directing that all

development applications be held in abeyance until the agency's next monthly meeting. Based on thisresolution, action on plaintiffs' application was withheld. Id. Subsequently, a series of resolutionswere adopted, the purpose of which was to enable the HMDC to complete its feasibility study andthe net effect of which was to place a freeze on all land development in the covered area. Id.Ultimately, the restrictions lasted for 19 months. Id. at 332.

Plaintiffs contended that the length of the moratorium constituted a public taking for whichthey were entitled to be paid just compensation. Id. The court noted that

[r]estrictions on land use short of a total appropriation, if sufficiently extensive andprolonged, may constitute a taking. [citations omitted] Whether such restrictionsupon the development of land, as opposed to outright appropriation, constitute acompensable taking usually turns on the particular facts of each case.

* * *

When evaluating temporary land use restrictions, courts should consider thereasonableness of the duration of any moratorium on development. In Deal Gardensv. Loch Arbour, 48 N.J. 492, 226 A.2d 607 (1967), the Court said:

Although the municipality may adopt a "stop gap" zoning ordinance,which if not temporary might be considered unconstitutional, suchpower is strictly limited and must be exercised with great caution.One of the more dangerous aspects of this type of legislation arisesfrom the damage which may result if there is no restriction period oftime during which a restraint against some land use is permitted tocontinue. Plainly there must be some terminal point. It is impossibleto establish an inflexible rule applicable to every cause. Each situationmust be assayed in its own particular factual setting to ascertainwhether the elapsed time during which the ordinance has been in effectis reasonable.

Id. at 332-33. One factor that the court considered to be relevant is the relationship that existedbetween the purpose of the moratorium and the time required to reach and to implement a finaldecision as to the use of the property. Id.

B. General Principles Regarding Growth Management Planningand Regulatory Implementations

One noted commentator has stated that

[g]rowth control measures may be employed for two principal purposes: (1) toprevent development and associated demands on public services from outstripping

available resources; and (2) to slow down, if not to stop, adverse changes incommunity character and "quality of life" which are perceived to result from rapidurban or suburban development.

Robert H. Freilich and Elizabeth A. Garvin, Takings After Lucas: Growth Management, Planning,and Regulatory Implementation Will Work Better Than Before, 1993 Inst. on Plan. Zoning &Eminent Domain § 5.04[1].

Growth management, unlike zoning alone, allows a city to control the timing of growth. Thisconception -- regulating the timing of growth -- has been consistently upheld since Ramapo, supra,as long as the regulation provides a reasonable use over a reasonable period of time. The conceptof "reasonable use" was first articulated in Village of Euclid, supra, and Nectow v. City ofCambridge, 277 U.S. 183 (1928). The reasonable period of time standard was added by Ramapo.

Additionally, as the above-referenced cases make clear, there is a distinction between (1)those cases where time is a factor in the determination of whether a taking has occurred, and (2)those cases seeking to determine the time of the taking once a taking has been determined to haveoccurred. For example, a number of the cases discuss First English, supra, in addressing variouslandowner's claims that any denial of use of property, no matter how short, is a "temporary taking"under First English. Those cases, however, have clarified that what First English held is that oncea taking has been determined, then compensation is due from the effective date of the takingregardless of how short the period of time the taking has been in effect, but in determining whethera taking has occurred in the first place, reasonable timing and sequencing regulations do not effecta taking because the property has not been permanently deprived of all value or use. If the propertyis provided a reasonable use over a reasonable period of time, no taking has occurred. See WoodburyPlace, 492 N.W.2d at 261 ("First English does not create a new liability standard to determine whena ̀ temporary' taking occurs, but clarifies the appropriate remedy after a taking is recognized."); LongBeach, 231 Cal. App. 3d at 1035 ("[The plaintiff] cannot take solace in [First English], which statedthat damages may be available for temporary total takings."); McCutchan Estates, 580 N.E.2d at 342(citing First English for proposition that the "question is whether the administrative delay was`extraordinary.'"); Zilber, 692 F. Supp. at 1206 n. 10 ("First English was concerned with the propermeasure of compensation once a taking is established, not the proper method of determining if ataking has occurred."); Guinnane, 197 Cal.App.3d at 869 ("[T]here is nothing in First English whichalters the established principle that the interim burden imposed on a landowner during thegovernment's decision making process, absent unreasonable delay, does not constitute a taking.").

Moreover, the Supreme Court's 1992 decision in Lucas, supra, did not change the basicstandard that there is no categorical take unless there is a permanent deprivation of all value and use.Legitimate growth control regulations do not present First English or Lucas taking claims sincegrowth control ordinances, by themselves, do not foreclose future use, as did the downzoningpresented in Lucas, but merely postpone the time when permitted development may occur. This issignificant because the land may retain considerable market value despite the regulation.

Based upon my review of the above-discussed cases, and certain commentators' workregarding growth control measures, I believe that there are certain fundamental guidelines that canbe extrapolated regarding growth management planning and regulatory implementation techniques.Those guidelines are as follows:

1. By working to time and phase growth, local governments can addressproblems of deteriorating infrastructure, fiscal deficits, degradation of theenvironment, energy shortfalls and other problems through land use planning. Suchland use planning must provide, however, a reasonable use of land over a reasonableperiod of time.

2. Growth management systems, if properly designed and implemented,can provide a framework to enable local governments to balance and accommodatethe goals of landowners and developers with legitimate governmental interests, whileensuring the quality of life expected by the community.

3. The element of time entered the land use/taking equation with thebeginning of growth management in the landmark decision of Ramapo, supra, wherethe New York high court upheld the timing and sequential control of residentialsubdivision activity for periods of up to 18 years - the first instance of a state highcourt and the United States Supreme Court upholding the uncompensated restrictionof development by means of time and sequential phasing under the due process clause.

4. Fundamentally, all growth management systems involve the control ofone or more of the familiar components of land use planning: the rate, location, type,density, amount and/or quality of development. Unlike traditional subdivision andzoning, which are two dimensional (controlling the use of land and the density ofpermissible development), growth management adds and emphasizes a thirddimension -- timing.

5. By accepting full population and employment growth through timedand sequenced development, property is afforded an urban use when public facilitiesbecome available and, thus, are not deprived of "all" use under the First English andLucas decisions.

6. If the regulation is not a permanent prohibition on development, timeis used as an element of the taking equation to determine what use is left to that land.It is important to distinguish between time of the taking and time as a factor of ataking.

7. Time as a factor in determining whether a taking has occurred will bean element in ascertaining remaining reasonable use of the land. If the regulation istemporary, all reasonable use has not been denied because there is a future use

remaining. Thus, for temporary regulations, the test is whether the regulation left areasonable use over a reasonable use of time.

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